Vertical Spread

An options strategy involving the simultaneous purchase and sale of two options of the same type (both calls or both puts) on the same underlying asset with the same expiration date but different strike prices. Vertical spreads limit both the maximum profit and maximum loss of the position, making them a defined-risk strategy. The four main types are bull call spreads, bear call spreads, bull put spreads, and bear put spreads, named for their directional bias and the option type used.