Options strategies
Credit spread
Definition
A vertical spread that pays you to open, because the option you sell is worth more than the one you buy. The net credit is the most you can make.
Example
Say a stock trades at $100 and you sell a $95 put for $2.00 and buy a $90 put for $0.80, collecting a net credit of $1.20, or $120. If the stock stays above $95 through expiration, both puts expire worthless and you keep the $120. If it ends below $90, you lose the $5 width minus the credit, $380 per contract.
Hypothetical numbers, for illustration only.
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