Debit spread (options)
Buying one option and selling another further out, paying a net premium for a capped gain and 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 spread (options)
Selling one option and buying another further out, collecting a net premium with a capped loss.
- Exercise (options)
Using the right an option gives you.
- Intrinsic value (options)
The amount an option is in the money: for a call, stock price minus strike, if positive.
- Options chain
The list of every available contract for a stock, by expiration and strike.
- Premium (options)
The price of an option, per share, times 100 per contract.
- Spread (bid ask)
The gap between the buying and selling price. A real cost every trade.
Ask about Debit spread (options)
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