Mastering Vertical Spread Options Trading for Key Stock Situations

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More than half of American households have made some type of investment in the stock market. If you’re part of that group, you’re likely concerned about the risk of your stocks losing value — but it helps to know that there are certain investing strategies you can adopt that may actually reduce that risk.

A vertical spread is one type of options trading strategy that can mitigate risk. Options trading allows you to pay a premium for the right to purchase a stock at a locked-in price, called the strike price, by a future date that’s known as the expiration date. Through a vertical spread you can make a profit on the stocks you already own, even if you don’t end up selling them — making this a seriously appealing type of investment strategy. But before you get started, it’s important to learn the basics of vertical spreads and the benefits of the four main types.