(I'm referring to options trading)
2006-11-02 02:55:28 · 6 answers · asked by stockjunkie 2 in Business & Finance ➔ Investing
there are many different types of options spreads. Essentually it is the process of concurrently buying and selling different options on the same stock or future. For example a bull spread is the purchase of a long call at one price and selling higher priced call both with the same expiration date. With this strategy ones loss is limited to the difference between the buy and sell prices realized. Ones gain is also however limited to the difference between the strikes prices minus the net primiums.
2006-11-02 03:28:01 · answer #1 · answered by Anonymous · 0⤊ 0⤋
You have two prices involved a Bid/Put and an Ask/Call price the difference between the two is the spread. Say the Bid is $1.00 and the Ask is $1.50 then the spread is .50. If you Buy, you are Bidding that you Buy for $1. If you Sell you are Asking/Selling at $1.50.
Normally the money in the Spread cover unseen people involved in the Transaction. Like the People on the Stock Exchange floor hollering and screaming.
So, to actually make a profit you have to cover your SEEN Broker fee and the not to seen Spread.
I hope I got these correct, sometimes I get them turned around, but, you can see the concept. It in most anything like this, Stocks, Options, FOREX, Commodities etc.
I trade Stocks and FOREX. For an example I like to trade the Polish Zloty with the American Dollar. Depending on this market, I have seen my spread anywhere from $35 to $1,000. I only buy/sell when it $35. ;-)
2006-11-02 03:08:59 · answer #2 · answered by Snaglefritz 7 · 0⤊ 0⤋
A type of option that derives its value from the difference between the prices of two or more assets. Spread options can be written on all types of financial products including equities, bonds and currencies. This type of position can be purchased on large exchanges, but is primarily traded in the over-the-counter market.
Some types of commodity spreads enable the trader to gain exposure to the commodity's production process. This is created by purchasing a spread option based on the difference between the inputs and outputs of the process. Common examples of this type of spread are the crack, crush and spark spreads
2006-11-02 03:08:20 · answer #3 · answered by jojo 3 · 0⤊ 0⤋
There are lot of spreads. Few of them are spread betwen long term and short term bonds or sometime spread between equity returns and t bill returns.
Then there is the ted spread, where it is the difference between the short term interest rate and exchange rate.
Then in Option trading there are a bunch of them like Bull, Bear, Butterfly, strap, straddle, strip etc; I will explain the first as buying the highest priced option and selling the lowest priced one of the same expiry.
When you take advantage of value differences between two entities we call it as spreading.
2006-11-02 05:23:07 · answer #4 · answered by Mathew C 5 · 0⤊ 0⤋
spread is gap between bid and ask price in the quoatation for a security. also term used in option trading
2006-11-02 03:13:20 · answer #5 · answered by Hitu 1 · 1⤊ 0⤋
LOL, I was going to say creamy butter with ingriedient's of your choice like garlic, but you've got me beat in options trading!
2006-11-02 03:15:33 · answer #6 · answered by xenypoo 4 · 0⤊ 0⤋
Lox
2006-11-02 03:03:20 · answer #7 · answered by DJFresh 3 · 1⤊ 0⤋