A spread trade is a single trading instrument.

How to execute a spread trade?

There are many prop brokerage firms that offer the ability to enter spread trades as a single transaction on their platforms. If you are considering trading spread check with a broker on exactly the best method to execute a trade on the platform.

Spread option trade

All actively trade securities have a price where the ability to quickly sell a certain number of shares or contracts and a price where shares or contracts may be purchased. The price where the ability to sell exists is known as the bid or where the market is bidding to buy securities. The offeror asks which is the price where the market is offering to sell is also the price where a purchase may be made.

We can understand through 10 XYZ Apr 50 calls may be sold for 1.75 and 15 XYZ Apr 50 call options may be purchased for 1.80.as with the stock quote. this is dependent on no market orders jumping in front of a trader entering an order, or market participants moving their order from the price that represents the current bid or asks.

Single option spread

There are broker s that may have the ability to obtain a single bid and ask quote for executing a buy-write. Let see example XYZ which is being currently bid at 48.75 and offered at 49 in the marketplace. The option being considered in this buy-write transaction XYZ Dec 50call. A trader would like a quote on selling on XYZ Dec 50 call and buying 100 shares of XYZ in a single transaction.

Based on the underlying market price quote may appear to be something like the bid-ask spread of 47.05*47.45.

The bid side 47.05 of this market quote involves a price that buy-write would be excited. Exiting the buy-write at the prevailing market price s would involve selling shares of XYZ at 48.75 and repurchasing the XYZ Dec 50call at 1. The net proceeds from this transaction would be 475 or an income of48.75 for selling shares then paying out 1.70 to buy back the call options.