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InvestHub.com's
Finance Dictionary and Glossary of Investment Terms

Credit spread  

Definition 1.

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.
 

Definition 2.

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.
 

Definition 3.

A spread option position in which the price of the option sold is greater than the price of the option bought.
 

Definition 4.

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.
 
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