It’s All About the Frontspread

When a trader has less long positions then short it is called Frontspread. It has huge risk where earning the profit has limited scope. Normally professional investors, who expect the underlying to make upward movements make use of this option strategy.

Frontspread is even known by the name “Ratio Vertical Spread”.

A Christmas tree is the best example for Frontspread. When an investor purchases with one call option and to cover the same sells two different call options at better strike prices, it is called Frontspread.

Such investors have higher risk because of an extra short call option which must be tried by professional investors only.

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September 25, 2008 · Filed Under Options Trading Strategies

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