SIE practice questionmediumDebit/credit spreads
If an option spread requires a net payment when established, it is classified as a:
- AShort spread
- BCredit spread
- CReverse spread
- DDebit spread✓ Correct answer
Explanation
Why D — Debit spread
A debit spread means the investor paid more to buy the option than received from selling the option. Credit spreads result in a net credit, and the others are not standard terms.
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