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Spread

Spread is a combination of two options or one or more call options with one or more put options on the same underlying instrument with different strike prices or different time to maturity. Spread may be achieved by price (known as money spread) - different strike price and the same time to maturity; or by the time (time spread) - the same strike price and different maturity dates.

For example, spread can be achieved by buying call option with strike price X1 and selling another call option with strike price X2 and same maturity date. In this case there could be three different results: stock price is below both X1 and X2 (zone of the lowest price), price is between X1 and X2 (middle zone) and price is above the X1 and X2 (zone of highest price).


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