Meaning & use
call spread option
Last updated
Meaning
nouncountable
a financial strategy that combines buying and selling call options on the same asset to limit risk
Grammar: Countable; use 'a call spread option' for one strategy and 'call spread options' for more than one.
Patterns
- a call spread option on a stock
- use a call spread option
- trade call spread options
The trader used a call spread option to reduce the cost of the trade.
A call spread option can limit both potential gains and losses.
Investors often choose a call spread option when they expect a moderate rise in the stock price.
Word forms
| plural | call spread options |
|---|
Common combinations
- buy a call spread option
- He decided to buy a call spread option instead of a single call.
- a bull call spread option
- A bull call spread option profits when the underlying asset rises moderately.
- call spread option strategy
- The call spread option strategy is popular among retail traders.
Synonyms and how they differ
- call spread
- A shorter, more common term for the same strategy, often used in everyday trading talk.
Word family
- call option noun
- A contract giving the right to buy an asset at a set price.
- spread noun
- The difference between two prices or rates, or a strategy combining multiple options.
Commonly confused: call spread option or put spread option?
call spread option vs put spread option
A put spread uses put options instead of call options and is used when expecting a price fall, not a rise.
Practice
What does a call spread option typically involve?
Choose one answer.
A call spread option combines two call options with different strike prices to limit risk and cost. Option 2 is just a single call, option 3 mixes puts and calls, and option 4 is not an option strategy.
Make it your own
Write a sentence using “call spread option”, then check it and compare it with the examples above.