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Definition of Vertical spread

Vertical Spread Image 1

Vertical spread

Simultaneous purchase and sale of two options that differ only in their exercise price. See:
horizontal spread.



Related Terms:

Bull spread

A spread strategy in which an investor buys an out-of-the-money put option, financing it by
selling an out-of-the money call option on the same underlying.


Credit spread

Related:Quality spread


Effective spread

The gross underwriting spread adjusted for the impact of the announcement of the common
stock offering on the firm's share price.


Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.


Horizontal spread

The simultaneous purchase and sale of two options that differ only in their exercise date.



Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.


Intramarket sector spread

The spread between two issues of the same maturity within a market sector. For
instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility
corporate bonds.


Vertical Spread Image 2

Maturity spread

The spread between any two maturity sectors of the bond market.


Option-adjusted spread (OAS)

1) The spread over an issuer's spot rate curve, developed as a measure of
the yield spread that can be used to convert dollar differences between theoretical value and market price.
2) The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the
base yield spread of an MBS without an operative call produces the option-adjusted spread.


Quality spread

Also called credit spread, the spread between Treasury securities and non-Treasury securities
that are identical in all respects except for quality rating. For instance, the difference between yields on
Treasuries and those on single A-rated industrial bonds.


Relative yield spread

The ratio of the yield spread to the yield level.


Spread

1) The gap between bid and ask prices of a stock or other security.
2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months.
Also known as a straddle.
3) Difference between the price at which an underwriter buys an issue from a firm
and the price at which the underwriter sells it to the public.
4) The price an issuer pays above a benchmark fixed-income yield to borrow money.


Spread

For options, a combination of call or put options on the same stock
with differing exercise prices or maturity dates.


spread

Difference between public offer price and price paid by underwriter.


Spread

The difference between items typically between two rates of interest or currencies.


Spread income

Also called margin income, the difference between income and cost. For a depository
institution, the difference between the assets it invests in (loans and securities) and the cost of its funds
(deposits and other sources).


Vertical Spread Image 3

Spread strategy

A strategy that involves a position in one or more options so that the cost of buying an
option is funded entirely or in part by selling another option in the same underlying. Also called spreading.


Spreadsheet

A computer program that organizes numerical data into rows and columns on a terminal screen,
for calculating and making adjustments based on new data.



TED spread

Difference between U.S. Treasury bill rate and eurodollar rate; used by some traders as a
measure of investor/trader anxiety.


Vertical acquisition

Acquisition in which the acquired firm and the acquiring firm are at different steps in the
production process.


Vertical analysis

The process of dividing each expense item in the income statement of a given year by net
sales to identify expense items that rise faster or slower than a change in sales.


VERTICAL ANALYSIS

A financial analysis technique that relates key amounts on the income statement and balance sheet to a 100 percent or base figure for the present and previous year.
It shows the percentage change from last year to this year, making it easier to spot problems that require analysis.


Vertical merger

A merger in which one firm acquires another firm that is in the same industry but at another
stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.


Yield spread strategies

Strategies that involve positioning a portfolio to capitalize on expected changes in
yield spreads between sectors of the bond market.



 

 

 

 

 

 

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