A vertical spread with limited risk might involve
A) buying a call and a put on the same stock with the same strike price.
B) buying a put at a lower strike price and a call at a higher strike price.
C) buying a call at a lower strike price and writing a put at a higher price.
D) buying a call at a lower strike price and writing a call at a higher strike price.

Question

Quizplus · Accepted Answer

A vertical spread with limited risk involves buying and selling options of the same class (calls or puts) with different strike prices. In choice D, buying a call at a lower strike price and writing a call at a higher strike price creates a bull call spread, which is a vertical spread with limited risk.

A Vertical Spread with Limited Risk Might Involve