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Options Spread Trading

Equity options markets and options spreads can be traded in the futures (commodities). Simultaneous purchase and sale of the same or similar commodity, in different or the same contract months defines an option spread. Trading spreads comes in many forms and under many different names, such as “straddle”, “strangle”, “calendar spreads”, and others. Because margin requirements are usually lower, spread trading is usually considered to be a lower risk strategy than an outright long or short futures position.

Because equity options spreads provide even more opportunities for successful spread trading, the spreads can be utilized in the future markets. As there are many variables involved (strike prices, trading months and different markets), trading option spreads offers many opportunities, by allowing numerous permutations and combinations of strategies. Some of the advantages of trading spreads are listed below:

• Smaller margin deposits are required
  
• Investment risk is lowered
  
• Among spread relationships, seasonal patters exist

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