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Chapter 7. Bull Call Spreads and Bull Pu... > Advantages of Spreads—A Summary

Advantages of Spreads—A Summary

Spreads are far preferable than simple buying or selling single leg options. We’ve already seen how we can improve our risk and breakeven profiles without damaging our maximum profit potential. Here is a summary of why we like to use spreads for our options trading:

  • Lower cost of trade—the sold option offsets the cost of the bought option.

  • Lower overall risk of the trade.

  • Lower breakeven of the (bullish spread) trade.

  • Day to day fluctuations of the spread position are slowed down because of Delta hedging properties of creating the spread.

  • Can be used for different time periods (Bull Calls for the long term and Bull Puts for the short term).


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