Back Spread (Backspread)
Buy more options than sold for directional exposure
What is Back Spread (Backspread)?
Back Spread (Backspread) A strategy that buys more options than it sells, creating unlimited profit potential in one direction. A call backspread sells a lower strike call and buys more higher strike calls. A put backspread sells a higher strike put and buys more lower strike puts. Often initiated for a net credit, backspreads profit from large moves.
Complete Definition
A strategy that buys more options than it sells, creating unlimited profit potential in one direction. A call backspread sells a lower strike call and buys more higher strike calls. A put backspread sells a higher strike put and buys more lower strike puts. Often initiated for a net credit, backspreads profit from large moves.
Example
Sell 1 AAPL $150 call, buy 2 AAPL $155 calls. If AAPL surges past $160, the two long calls significantly outpace the one short call.
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