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Spread trading strategies involves taking position in two - Bull - Bear - Box - Diagonal or Calendar Spread strategies - or more - Butterfly Spread strategy -options of the same type (call or put options) on the same underlying product (e.g. a stock). In detail option used into following strategies are european.

• Two options with same expiry date but different strike price:
  
• Bull Spread strategy: the combination of a long position on a call / put option with strike price K1 and a short position on a call / put option with higher strike price K2 (K2 > K1). The Bull Call Spread strategy involves an initial investment (the price of a bought call option is higher than the price of a sold call option), the Bull Put Spread strategy, instead, involves an initial benefit (the price of a bought put option is lower than the price of a sold put option);
  
  
• Bear Spread strategy: the combination of a short position on a call /put option with strike price K1 and a long position on a call / put option with higher strike price K2 (K2 > K1). The Bear Call Spread strategy involves an initial benefit (the price of a bought call option is lower than the price of a sold call option), the Bear Put Spread strategy, instead, involves an initial investment (the price of a bought put option is higher than the price of a sold put option);
  
  Downloads: template call options, template put options, documentation.
  
  
  

• Box Spread Strategy: the combination of a Bull Call Spread strategy and a Bear Put Spread strategy. If the investor has a long position on the Box Spread, this instrument involves buying a call with strike price K1, buying a put with strike price K2, selling a call with strike price K2 and selling a put with strike price K1. The opposite position on these four derivatives gives, as outcome, a short position on the Box Spread strategy.
  
  Downloads: template, documentation.
  

• Three options with same expiry date but different strike price:
  (Downloads: template, documentation)
  
  
• Butterfly Spread strategy: a long position on this strategy involves buying two call options, one with strike K1 and one with strike price K3 and selling two call options with strike price K2. K3 is higher than K2 and K2 is higher than K1. The same strategy can be made with same position in four put options: long in two options with strike price K1 and K3, respectively and short in two put options with strike price K2. 

Two options with different expiry date but same strike price:
(Downloads: template, documentation)


• Calendar Spread strategy: involves two options of the same type (calls or puts), same strike price, but different expiry date. A long position on Calendar Spread strategy involves selling a call / put with maturity, T1 and buying a call / put with higher maturity, T2. Normally the higher the expiry date, the higher the price of call / put options is, thus a long position on this strategy requires an initial investment.

Note: Into this template we include also a residual strategy, the Diagonal Spread strategy, a mix between a Calendar Spread strategy - same strike price but different expiry date - and a Bull - Bear Spread strategy - same expiry date but different strike price.

 

Option combinations involves taking position on two Straddle - Strangle strategies - even more - Strip and Strap strategies - european options of different types (call and put options) on the same underlying product (e.g. a stock) and the same expiry date. 

(Dowloads: template, documentation) 

• Straddle strategy: a bottom straddle (or straddle purchase) means to go long into two options, a call and a put, with the same strike price. If the investor, instead, writes the options, he enters into a (very risky) top straddle (or straddle write); 
  
  
• Strip and Strap strategies: they are equivalent to a Straddle strategy, but with the leverage on a call or put positions. In detail the Strip strategy involves a long position into three options: a call and two puts. The Strap strategy, instead, involves a long position into three options: two calls and one put. In a Strip the investor is betting that there will be a big stock price movement and he considers a decrease in the stock price to be more likely than an increase (thus buying more put options). In a Strap the investor is also betting that there will be a big stock price movement. However, in this case, an increase in the stock price is considered to be more likely than a decrease (thus buying more call options). As for Straddle strategy, the investor can assume a (very risky) short position by writing the options;
  
  
• Strangle strategy: it is the same of a Straddle, but the strike price of call options is higher than the strike price of put option. Normally, the higher the strike price, the lower the price of call option is (and viceversa for put option), thus the initial investment of the strategy is lower as like as an investment into a Strangle strategy. As opposite, the stock price movement must be higher to give profit.