Series 7 Chapter 3.13
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Created by:
acoblem923 on February 29, 2012
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Equity Options
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8 terms
Terms | Definitions |
|---|---|
 Bull Spread | Profits when the market rises Buy low - Sell high |
| Bear Spread | Profits when the market drops Buy high - Sell low |
| Calendar Spread | Spread with different expiration months on contracts |
| Vertical Spread | Spread with different strike prices on the contracts |
| Diagonal Spread | Spread with different strike prices & expirations months on the contracts |
| Debit Spread | 1. Difference in Premiums bought & solds results in a Debit. 2. Max loss is the Debit 3. Max gain is the difference of strike prices, less the Debit 4. Debit spreads must widen more than the debit & be closed to be profitable |
| Credit Spread | 1. Difference in Premiums bought & sold results in a Credit. 2. Max loss is the difference of strike prices less the Credit 3. Max gain is the Credit 4. Credit spreads can narrow & be closed or expire to profit |
| Breakeven on a Debit Spread | 1. Determined from LONG position always 2. Call: Long price + Debit 3. Put: Long price - Debit |
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