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Spread Techniques

The first popular strategy is the spread, the opening of two or more option positions on the same stock, involving different expiration dates or different strike prices. A more complex spread involves both different expiration and strike features.

The options industry has its own range of specialized terms, each used to communicate specific strategies and positions. For example, a spread can be described as vertical, horizontal, or diagonal. A vertical spread has different strike prices but the same expiration date. A horizontal spread is the opposite: it contains the same strike price but different expiration dates. A diagonal spread has different strike prices and different expirations. These three spreads are compared side by side in Figure 8-1


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