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What is vertical strategy?
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What is vertical strategy?

A vertical strategy (vertical spread) involves the simultaneous buying and selling of multiple options of the same underlying security, same type (puts or calls), same expiration date, but at different strike prices.

Long Call Vertical

A long call vertical is a strategy when you expect the price of the underlying security will go up within a certain time period. This strategy consists of a long call with a lower strike price and a short call with a higher strike price in the same expiration. A long call vertical strategy gives you the right to buy the underlying stock at the lower strike price and you also receive a premium for agreeing to sell the underlying stock at the higher strike price.

Long Put Vertical

A long put vertical is a strategy when you expect the price of the underlying security will go down within a certain time period. This strategy consists of a long put with a higher strike price and a short put with a lower strike price in the same expiration. A long put vertical strategy gives you the right to sell the underlying stock at the higher strike price and you also receive a premium for agreeing to buy the underlying stock at the lower strike price.

Short Call Vertical

A short call vertical is a strategy when you expect the price of the underlying security will stay the same or go down within a certain time period. This strategy consists of a short call with a lower strike price and a long call with a higher strike price in the same expiration. With a short call vertical strategy, you'll receive a premium for agreeing to sell the underlying stock at the lower strike price. You also have the right to buy the underlying stock at the higher strike price to mitigate your losses if the stock suddenly goes up and you get assigned.

Short Put Vertical

A short put vertical is a strategy when you expect the price of the underlying security will stay the same or go up within a certain time period. This strategy consists of a short put with a higher strike price and a long put with a lower strike price in the same expiration. With a short put vertical strategy, you'll receive a premium for agreeing to buy the underlying stock at the higher strike price. You also have the right to sell the underlying stock at the lower strike price to mitigate your losses if the stock suddenly goes down and you get assigned.

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