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Finance Dictionary and Glossary of Investment Terms
Applies to derivative products. Difference in the value of two options, when the value of the option bought exceeds the value of the one sold. One buys a "debit spread." Antithesis of a credit spread.
A strategy where the investor buys a call (put) and sells a further out-of-the-money call (put) to create a spread with an initial debit in the investor''s account. This is a conservative approach to trading options as it limits both the risk and reward relative to a straight option purchase.