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The Bible of Options Strategies: The Definitive Guide for Practical Trading Strategies by Guy Cohen

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Chapter 3. Vertical Spreads

Introduction

Vertical spreads are typically defined as two-legged option strategies with different strike prices but the same expiration date.

Whereas Calendar spreads are two-legged option strategies where both legs share the strike but not expiration (hence known as horizontal spreads), vertical spreads are the complete opposite.

Diagonal spreads are so called because both the strikes and the expiration dates are different for both legs.

Vertical spreads can be categorized into two types: net debit spreads and net credit spreads. A net debit spread is where you pay a net debit for the trade, thereby making you net long in options. Because you are net long in options, you're better off giving yourself plenty of ...

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