Question

You buy a call option on Summit Corp. with an exercise price of $40 and an expiration date in September, and you write a call option on Summit Corp. with an exercise price of $40 and an expiration date in October. This strategy is called a

Answer 1

This strategy is known as

Time Spread.

Step-by-step explanation:

Time Spread:

In financial terms, finance spread is such a trade in which we buy a thing that is expiring on a particular date and then we simultaneously, sell this expiring thing on another date.

• This term is also known as the calendar spread as well as horizontal spread.
• In this situation, you buy a call option on expiration date in September and purchase it with expiration date in October.