Buy A Spread

Old Playboy joke goes here. But yeah, wow...that era has passed.

Anyway...buying spreads involves trading in put options (predicting the price will go down) or call options (predicting the price will go up). A spread strategy is carried out by purchasing one put or call option, while at the same time selling another put or call option with a higher strike price.

The investor might decide to do a bull call spread by buying a call option with a spread between a lower exercise (strike) price and premium than the option that will be sold.

For example, SuperheroLifeInsurance, Inc.’s stock price is expected to go up, so you buy a call option at a strike price of $50 and a premium of $150. You will get your bull spread if you sell a call option on the same stock with a $60 strike price and a premium of $100. Both must have the same expiration date.