Backspread

Today's term of the day is "Backspread". A backspread is a type of spread wherein the trader possesses more long positions and fewer short positions. The gains that are realized from selling the short option is used to aid in buying more long options. This particular spread gives a trader the opportunity gain a more marked exposure to movements in the asset while also lessening the loss if ever prices do not move in the direction that he predicted.

Have a great weekend!