Price Spread

Definition - What does Price Spread mean?

Price Spread is a term used to describe an option spread where the long and short option differ only in exercise prices.

Testopedia explains Price Spread

A price spread or vertical spread consists of one long option and one short option of the same class with different strike prices. The position is normally called a price spread because of the difference in strike prices between the long and short options. It may also be called a vertical spread because of the way the options are listed in the option chain or in the newspaper. A price spread could be established in either calls or puts as follows: Example: Long 1 TRY May 40 call Short 1 TRY May 50 call A price spread could also be established using puts Long 1 TRY April 60 put Short 1 TRY April 50 put

Connect with us

Testopedia on Linkedin
Testopedia on Linkedin
Tweat www.testopedia.com
"Testopedia" on Twitter


'@Testopedia'
Sign up for Testopedia's Free Newsletter!