A spread option is a type of option that derives its value from the difference, or spread , between the prices of two or more assets. Other than the unique type of underlying asset—the spread —these options act similarly to any other type of vanilla option. Note that a spread option is not the same as an options spread. In finance, a spread option is a type of option where the payoff is based on the difference in price between two underlying assets.
For example, the two assets . Spread option trading is a technique that can be used to profit in bullish, neutral or bearish conditions. It basically functions to limit risk at the cost of limiting profit. A long call spread , or bull call spread , is an alternative to buying a long call where you also sell a call at a strike price below the purchased call strike price. A long put spread , or bull put spread , is an alternative to buying a long put where you also sell a put at a strike price below the purchased put strike price.
Get one projectoption course for FREE when you open and fund your first tastyworks brokerage account with. Learn about calendar spreads. Latest Spread option articles on risk management, derivatives and complex finance. Definition: An option spread is an options strategy that requires the opening two opposite positions to hedge against risk.





