Options have a potential to drag the trader into losses if the trade is being carried out without any knowledge. Where as if one knows how to trade options then they can make use of several strategies which can help them minimize the amount of risks and at the same time it increases the chances to earn profit. If an effort is made to learn options trading then one can find out how flexible and powerful options are and how one can take advantage of this trading instrument.

Option Spread Trading is one of the best strategies to capitalize upon among all the available strategies. Clubbing two separate option trades with different strike price and different expiry can be termed as option spreads. Also within this strategy there are different ways how one can trade:

1.)    Vertical spreads: Includes the option trades which belong to the same underlying security, similar expiration month but are being traded at distinct strike price.

2.)    Horizontal or calendar spreads: Includes the option trades which belong to the same underlying security and similar strike prices but with distinct expiration dates.

3.)    Diagonal spreads: These spreads are called diagonal because they are a combination of Vertical and Horizontal spreads. In Diagonal spreads same underlying securities are being traded but with distinct strike prices and expiration dates.

4.)    Bull and Bear spreads: If a spread is being created where in the trades would be in profit if the price of underlying security rises then it is a bull spread. Where as if a spread is being created where in the trades would be in profit if the price of underlying security is going down then it is bear spreads.

5.)    Ratio spreads and backspreads: Spreads are also being designed where unequal quantity of options are being purchased and sold at the same time. So if more options are being sold than are bought then the trade is being termed as ratio spread. On the contrary if more options are purchased than sold then the trade is being termed as backspread.

Above were some of the ways how a trader can design spread position with options. A trader can choose the option spread trading strategy that best suits the current market situations and his/her current portfolio.

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