CHAPTER 12
Horizontal Spreads
The horizontal spread is a member of the calendar spread or time spread family. In order to draw a real-life analogy to illustrate the concept, Shawn relates a story about his family's approach toward hands-on investing:
I grew up on the central coast of California in the 1970s. This period was characterized by high inflation, high interest rates, and lackluster stock market returns (not to mention questionable fashion taste!). The one bright spot for the central coast was the rapid and dramatic increase in residential real estate values and rents.
My parents were interested in acquiring real estate assets as a way to stay ahead of inflation and position themselves for retirement, still decades away, with income-producing investments. As a family, we set out to acquire several properties over the next few years with a strategy that was similar to the way an options investor would use a horizontal spread.
Every few summers, my parents would go looking for a single-family residence in need of repairs and some updates. They could usually purchase the property with a minimum down payment and then finance the balance, keeping enough money aside to repair and renovate their new investment. As new investment properties were purchased, they would be added to an existing portfolio of residential rental properties. Because both my parents were in education for the local school district and my brother and I were both students, the four of us had the entire summer ...
