Credit spread (options)
Selling one option and buying another further out, collecting a net premium with a capped loss.
Where it is explained in full
Options from the beginning: calls, puts, and the Greeks in plain words. What a contract actually is, what the numbers on the screen mean, and why an option's value before expiration is not the same as its payoff at expiration.
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Words beside it
- Bid ask spread
The gap between bid and ask. A real cost of trading, paid on entry and exit.
- credit rating
A credit rating is a letter grade assigned by a private company that studies how likely a borrower is to repay its debts. A higher grade means the borrower is considered safer and a lower grade means there is more chance they might not pay.
- credit risk
Credit risk is the chance that the person or organization you lent money to will not pay you back as promised. A higher credit risk means there is a greater possibility of losing some or all of your money.
- Credit score
A number lenders use to guess whether you pay. Driven mostly by paying on time and using little of your available credit.
- Debit spread (options)
Buying one option and selling another further out, paying a net premium for a capped gain and capped loss.
- Exercise (options)
Using the right an option gives you.
- full faith and credit
Full faith and credit is a phrase meaning the United States government officially promises to repay a debt using all of its resources and legal authority. It is considered one of the most reliable guarantees a borrower can give because the government can raise taxes or print money to honor the promise.
- Intrinsic value (options)
The amount an option is in the money: for a call, stock price minus strike, if positive.
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