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In finance, a calendar spread (also called a time spread or horizontal spread) is a spread trade involving the simultaneous purchase of futures or options expiring on a particular date and the sale of the same instrument expiring on another date. These individual purchases, known as the legs of the spread, vary only in expiration date; they are ...
[3] [4] In other words, a trader combines a synthetic long position at one expiry date with a synthetic short position at another expiry date. [2] [5] [6] Equivalently, the trade can be seen as a combination of a long time spread and a short time spread, one with puts and one with calls, at the same strike price. [1]
A box spread consists of a bull call spread and a bear put spread. The calls and puts have the same expiration date. The resulting portfolio is delta neutral. For example, a 40-50 January 2010 box consists of: Long a January 2010 40-strike call; Short a January 2010 50-strike call; Long a January 2010 50-strike put; Short a January 2010 40 ...
The calendar call spread (see calendar spread) is a bullish strategy and consists of selling a call option with a shorter expiration against a purchased call option with an expiration further out in time. The calendar call spread is basically a leveraged version of the covered call (see above), but purchasing long call options instead of ...
Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows: Long 1 put with a strike price of (X + a) Short 2 puts with a ...
The iron condor is an options trading strategy utilizing two vertical spreads – a put spread and a call spread with the same expiration and four different strikes. A long iron condor is essentially selling both sides of the underlying instrument by simultaneously shorting the same number of calls and puts, then covering each position with the purchase of further out of the money call(s) and ...
The short straddle can also be classified as a credit spread because the sale of the short straddle results in a credit of the premiums of the put and call. The risk to a holder of a short straddle position is unlimited due to the sale of the call and the put options which expose the investor to unlimited losses (on the call) or losses limited ...
Payoffs of short strangle. A strangle, [note 1] requires the investor to simultaneously buy or sell both a call and a put option on the same underlying security. The strike price for the call and put contracts are usually, respectively, above and below the current price of the underlying. [2] [3] [4]