When option spreads can be use ?

An Option spread is created by a trader who simultaneously takes two positions at BUY or SELL of an option of the same asset. The expiration and strike prices of the Options chosen are different. Option spreads that involve Call Options are called Call spreads, while those that involve Put Options are called Spreads.

Option spreads can be used to reduce capital requirements or minimize risk in trades. To buy an Option, you must pay a premium. However, you will receive premium when you sell it. When you simultaneously buy and sell options, your net investment will be the difference between the premium received and the premium paid. Losses in one position can be offset or minimized by gains from another position, which will help you minimize your losses across the spread.