Glossary of Option Terms: Backspread
Backspread
Definition: An option-spread type of play where you buy and sell different amounts of options on each leg. You will take in more premium than you shell out; hence, you will receive a credit at the beginning of the trade.
The only downside to the backspread is that the stock or commodity MUST make the big move you anticipated, or else the position will start to slowly lose money. The profit potential is unlimited, and if your market direction is completely wrong, you can still walk away unscathed.
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