A strategy in which a trader sells a lower strike call and buys a higher strike call to create a trade with limited profit and limited risk. A fall in the price of the underlying increases the value of the spread. Net credit transaction; Maximum loss = difference between the strike prices less credit; Maximum gain = credit; requires margin.
See Also:
Bear: An investor who acts on the belief that a security or the market is falling or is expected to fall.
Call: An Option contract that gives the holder the right to buy the underlying security at a specified price for a certain, fixed period of time.
Spread: A trade in which two related contracts/stocks/bonds/options are traded to exploit the relative difference in price change between the two. A trading strategy in which a trader offsets the purchase of one trading unit against another.
