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Horizontal spread

• Is a spread which is composed of two puts or two calls on the same underlying instrument. It is called horizontal because both options have the same strike or exercise price but two different expiration dates. Generally, the trade is placed with the nearby option sold and the deferred option purchased. This is an attempt to capitalize on the acceleration in time value decay for the nearby relative to the deferred contract month.

• The simultaneous purchase and sale of two options that differ only in their exercise date.

 
 

Follow this link for all the terms related to spread.

 
 Embedded terms in definition
 Contract month
Contract
Exercise price
Exercise
Expiration date
Expiration
Nearby
Options
Option
Purchase and sale
Purchase
Sale
Spread
Time value
Time
Trade
Underlying
 
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