Options spreads are the basic building blocks of many options trading strategies. A spread position is entered by buying and selling equal number of options of the same class on the same underlying security but with different strike prices or expiration dates. The three main classes of spreads are the horizontal spread, the vertical spread and the diagonal spread. They are grouped by the relationships between the strike price and expiration dates of the options involved -

• A spread of minus-seven (-7) means that a is favored to win the game by a touchdown (technically, a touchdown and the extra point). A team favored by -7 must win the game by eight or more points to win the bet. If the team wins by seven, the result is a “push” and the bet is refunded.
• A point spread, or simply “the spread”, is a sports betting number made by oddsmakers at sportsbooks that serves as a handicap between two opponents. Because not all teams are equal in skill.

Fixed spreads are offered by brokers that operate as a market maker or “dealing desk” model. Using a dealing desk, the broker buys large positions from their liquidity provider(s) and offers these positions in smaller sizes to traders. COVID-19 most commonly spreads during close contact and can also be spread by airborne transmission. Symptoms, testing, what to do if sick, daily activities, and more. Skip directly to site content Skip directly to page options Skip directly to A-Z link.

• Vertical spreads, or money spreads, are spreads involving options of the same underlying security, same expiration month, but at different strike prices.

• Horizontal, calendar spreads, or time spreads are created using options of the same underlying security, same strike prices but with different expiration dates.

• Diagonal spreads are constructed using options of the same underlying security but different strike prices and expiration dates. They are called diagonal spreads because they are a combination of vertical and horizontal spreads.

Call and put spreads[edit]

Any spread that is constructed using calls can be referred to as a call spread, while a put spread is constructed using puts.

Bull and bear spreads[edit]

If a spread is designed to profit from a rise in the price of the underlying security, it is a Bull spread. A bear spread is a spread where favorable outcome is obtained when the price of the underlying security goes down.

Credit and debit spreads[edit]

How Spreads Work In Football

If the premiums of the options sold is higher than the premiums of the options purchased, then a net credit is received when entering the spread. If the opposite is true, then a debit is taken. Spreads that are entered on a debit are known as debit spreads while those entered on a credit are known as credit spreads.

Ratio spreads and backspreads[edit]

There are also spreads in which unequal number of options are simultaneously purchased and written. When more options are written than purchased, it is a ratio spread. When more options are purchased than written, it is a backspread.

Spread combinations[edit]

Many options strategies are built around spreads and combinations of spreads. For example, a bull put spread is basically a bull spread that is also a credit spread while the iron butterfly can be broken down into a combination of a bull put spread and a bear call spread.

Box spread[edit]

A box spread consists of a bull call spread and a bear put spread. The calls and puts have the same expiration date. The resulting portfolio is delta neutral. For example, a 40-50 January 2010 box consists of:

• Long a January 2010 40-strike call
• Short a January 2010 50-strike call
• Long a January 2010 50-strike put
• Short a January 2010 40-strike put

A box spread position has a constant payoff at exercise equal to the difference in strike values. Thus, the 40-50 box example above is worth 10 at exercise. For this reason, a box is sometimes considered a 'pure interest rate play' because buying one basically constitutes lending some money to the counterparty until exercise.^{[citation needed]}

Box spreads expose investors to low-probability, extremely-high severity risk: if the options are exercised early, they can incur a loss much greater than the expected gain.

Net volatility[edit]

For the main article, see net volatility

The net volatility of an option spread trade is the volatility level such that the theoretical value of the spread trade is equal to the spread's market price. In practice, it can be considered the implied volatility of the option spread.

References[edit]

• McMillan, Lawrence G. (2002). Options as a Strategic Investment (4th ed.). New York : New York Institute of Finance. ISBN0-7352-0197-8.

External links[edit]

• Option Strategies - An illustrated introduction to option spreads.
• Options spread at Curlie

How Spreads Work Forex

If you've never set foot in an actual sportsbook before or logged into an online sportsbook, the chances of you getting overwhelmed when you actually do are very high. In an actual Las Vegas sportsbook, there is typically a lot of commotion, and the odds and lines are displayed on a massive digital board for everyone to see. When a novice sports bettor looks at the massive digital signage, they will see a bunch of numbers, both positive and negative, some two digits, some three digits. They also won't have a clue what any of it means. The same can be said for the online sportsbooks. It essentially looks like a massive spreadsheet with negative and positive numbers beside each teams' name.

How the Point Spread Works

The easiest way for me to describe what all these numbers mean to you is to define it as point spread betting . Point spread betting is the most popular way to bet on the NFL and NBA, and it is a way for a sportsbook to generate betting interest on both sides.

When two teams square up for a matchup, whether that be on the gridiron or on the basketball court, one team is typically better than the other (for whatever reason you want to believe). Since sportsbooks are in the business of making money, they tag the better team with a point spread, thus making them the 'favorites' to win that specific game. Normally, the favorite has a few favorable factors working for them like playing at home or being well rested or playing a revenge game against a team that previously beat them. Every factor counts in the world of betting, and it's up to you to decide if the 'favorite' can, in fact, cover the point spread.

If sports betting were an easy hobby, we would take the better team (playing at home) every single time and collect our winnings. But sportsbook adjust and price the money line astronomically high (depending on how much better they are than their opponent), and it simply is not worth it to lay that kind of juice.

Hypothetical Point Spread Scenario

Let's use the 2019 Super Bowl matchup between New England and Los Angeles as an example.

Moments before kickoff, sportsbooks were sitting with New England -2.5 or Los Angeles +2.5. This is what it would look like online:

Los Angeles +2.5 (-110)
New England -2.5 (-110)

This is what it would look like in a Las Vegas sportsbook:

501. New England Patriots -2.5 (-110)

502. Los Angeles Rams +2.5 (-110)

Using the example above, the linemakers have determined that the New England Patriots are two-and-a-half-point favorites over the Los Angeles Rams. The favorite team can also be referred to as the chalk . The favorite will always be represented by a negative (-) number, while the underdog will always be represented by a positive (+) number.

Based on the line above and which team you decide to bet on, the Patriots must win by three or more points in order for those with a Patriots (-2.5) ticket to be declared a winner. As long as the Patriots win by three or more points, the final score itself does not matter. A 3-0 win is just as much a winner as a 34-31 win.

However, if the Patriots were to win the game by two points or less, then all Patriots backers can toss their tickets in the trash. A 30-28 or 21-20 Patriots win would cash the tickets with Los Angeles +2.5 on them. A Rams outright win as two-and-a-half-point underdogs would also do the same.

The same rules apply to the NBA as well. The favorite must win by more than the line dictates, while the underdog must stay within the number or win the game outright.

Standard Point Spread Line

The standard price to pay when betting on point spreads is (-110). This is the sportsbooks way of ensuring a profit no matter which side covers the spread. The extra 10 cents is also known as the 'juice' or 'vig' . Paying the extra 10-cents is like paying a tax or commission to the sportsbook for brokering the bet.

The -110 line means that in order for you to profit $100, you must wager $110. Some sportsbook offer something called 'reduced juice' , which means that you can still profit $100 but the risk is a few dollars less.

For example, if you see reduced lines such as -7.5 (-105), that means that you must risk $105 dollars in order to profit $100. If you see -7.5 (-102) then you must bet $102 in order to profit $100. It may not seem like a big deal at the time, but saving a few bucks each time over the course of the season can really help your bankroll.

Which brings me to my next point. If you are serious about getting into sports betting, it is vital to have more than one sportsbook to make a wager at. Shopping around for the best lines will help your bankroll, and you will be able to turn a bigger profit. If you see a pair of sneakers for $110 at one store, and the exact same pair is $102.99 at another store - which store are you buying them from?

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