Meaning & use

call spread option

noun·Advancedfinancebusiness

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UK/ˈkɔːl spred ˌɒp.ʃən/
US/ˈkɔːl spred ˌɑːp.ʃən/

Meaning

  1. 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

pluralcall 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?

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