You buy a call option on Merritt Corp. with an exercise price of $50 and an expiration date in July, and you write a call option on Merritt Corp. with an exercise price of $55 and an expiration date in July. This is called a ________.
A) time spread
B) long straddle
C) short straddle
D) money spread

Question

Quizplus · Accepted Answer

This strategy is called a "money spread" or more commonly known as a "vertical spread." It involves buying and writing call options on the same underlying asset with the same expiration date but different strike prices.

You Buy a Call Option on Merritt Corp