Series 7 practice questioneasyOptions — Spread Terminology
A vertical spread involves options with the same underlying and expiration but different:
- ATypes (calls and puts)
- BExpiration dates
- CStrike prices✓ Correct answer
- DContract sizes
Explanation
Why C — Strike prices
A vertical spread (also called a price or money spread) involves two options of the same type, same underlying, and same expiration, but with different strike prices. Bull call spreads, bear call spreads, bull put spreads, and bear put spreads are all types of vertical spreads.
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