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buy a spread

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Financial Dictionary

buy a spread

In options trading, to establish a spread position in which the premium on the option purchased exceeds the premium on the option sold. A typical example would be to buy a call on Microsoft with a $60 strike price for a premium of $300 and to sell a Microsoft call with a $65 strike price for $125 (both expiring on the same date).

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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