In options trading, a vertical spread is an

options strategy Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. Call options, simply known as Calls, give the buyer a right to buy a particular stock at that ...

involving buying and selling of multiple options of the same

underlying In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be use ...

security, same expiration date, but at different strike prices. They can be created with either all calls or all puts. The term originates from the trading sheets that were used in the

open outcry Open outcry is a method of communication between professionals on a stock exchange or futures exchange, typically on a trading floor. It involves shouting and the use of hand signals to transfer information primarily about buy and sell order ...

pits on which option prices were listed out by expiry date & strike price, thus looking down the sheet (vertical) the trader would see all options of the same maturity. Vertical spreads can sometimes approximate

binary option A binary option is a financial exotic option in which the payoff is either some fixed monetary amount or nothing at all.Breeden, D. T., & Litzenberger, R. H. (1978). "Prices of state-contingent claims implicit in option prices". ''Journal of Busin ...

s, and can be produced using vanilla options. *Bull vertical spread -

Bull call spread In options trading, a bull spread is a bullish, vertical spread options strategy that is designed to profit from a moderate rise in the price of the underlying security. Because of put–call parity, a bull spread can be constructed using either ...

and bull put spread are bullish vertical spreads constructed using calls and puts respectively. *Bear vertical spread - Bear call spread and bear put spread are bearish vertical spreads constructed using calls and puts respectively.

References

* {{Derivatives market Options (finance) Derivatives (finance)