Applies to derivative products. Difference in the value of two options, when the value of the one sold exceeds the value of the one bought. One sells a "credit spread." Antithesis of a debit spread Related: Quality spread.
1. The spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. 2. An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.
A spread option position in which the price of the option sold is greater than the price of the option bought.
A strategy used to collect a credit when the spread is initiated. Bullish credit spreads involve selling an out-of-the-money put and buying a further out-of-the-money put for protection. Similarly, bearish credit spreads use out-of-the-money calls.