What are Spread Options?
Spread options are the most basic derivative of option contracts. They are option contracts which are created on the difference between two underlying financial products. Simply spread options are options which enable the holder to buy sell two related options simultaneously. These options usually will have dissimilar strike prices and expiration rates.
Spread options are available for stocks, currencies and bonds. They are mostly traded over the counter (OTC), but also available in large markets. The most popular use of spread options are in commodity and forex currency markets. There are many types of spreads available as spread options as crack spread – in which one commodity is for crude oil, crush spread – in which one commodity is soybean, spark spread – for electricity commodities, calendar spread, dual spread, etc.
Spread options are simple contracts and are simple to trade. Their increased popularity has contributed to the stability of all major financial markets. Spread options provide both American and European style of exercises. They may be two asset options or three asset options.
Spread options are available for stocks, currencies and bonds. They are mostly traded over the counter (OTC), but also available in large markets. The most popular use of spread options are in commodity and forex currency markets. There are many types of spreads available as spread options as crack spread – in which one commodity is for crude oil, crush spread – in which one commodity is soybean, spark spread – for electricity commodities, calendar spread, dual spread, etc.
Spread options are simple contracts and are simple to trade. Their increased popularity has contributed to the stability of all major financial markets. Spread options provide both American and European style of exercises. They may be two asset options or three asset options.
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