Spread

A position made of two or more options combined, usually to cap both the cost and the risk.

In options trading, a spread means holding two or more legs on the same underlying at the same time, usually one you buy and one you sell. Instead of betting on a single option, you combine them so the option you sell helps pay for the one you buy. This lowers your cost and, just as importantly, caps how much you can lose or make.

A classic example is a bull call spread: you buy a 100 call and sell a 110 call in the same expiry. If the stock rises above 110, both legs are in the money and you collect the full width between the strikes, minus the premium you paid. Your maximum loss is limited to that premium if the stock stays below 100.

The common mistake is forgetting that a spread caps your upside too. Beginners often love the cheaper entry but feel cheated when a stock rockets past the short strike and their gain stops there. Also watch the bid-ask spread on each leg, since paying up on two options at once quietly eats into an already limited profit.

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All options terms

Call Put Strike price Premium Expiration In the money (ITM)At the money (ATM)Out of the money (OTM)Intrinsic value Time value (extrinsic)Delta Gamma Theta Vega Implied volatility (IV)Open interest Assignment Exercise Break-even Probability of profit (POP)Assignment risk / early assignment LEAPS Naked (uncovered) option Rho Historical volatility (HV)Volume Bid-ask spread Moneyness Covered call Cash-secured put Vertical spread Iron condor Straddle Strangle Rolling Margin Max pain American-style option European-style option Contract multiplier Debit vs credit Volatility skew The Greeks Underlying Hedge Leverage Expected move Notional value Protective put Collar Butterfly spread Iron butterfly Calendar spread Diagonal spread Credit spread Debit spread Bull call spread Bear put spread Ratio spread Synthetic position The wheel strategy Poor man’s covered call (PMCC)Box spread Put-call parity Pin risk IV crush IV rank / IV percentile Ex-dividend date Deep in the money Weeklys 0DTE (zero days to expiration)Order types (to open / to close)Buying power reduction Cash settlement Market maker Slippage Mid price Black-Scholes model

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.