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Debit Spread


A spread option position whereby the price of the option purchased (long option) is larger than the price of the option sold (short option). The debit spread is created when an investor buys an option with a higher price (premium) and simultaneously sells an option with a lower price (premium). Whether calls or puts are used, the net front is always equal to the difference in premiums.

This spread is also known as a front spread.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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