Question

For a spread to be successful, the difference in strike prices must be greater than the net cost of the purchase

a. True
b. False

Answer 1

False. The difference in strike prices does not need to be greater than the net cost of the purchase for a spread to be successful.

Step-by-step explanation:

False

A spread can be successful if the difference in strike prices is greater than the net cost of the purchase, as well as if the spread price increases in value. The net cost of the spread is the difference between the premiums paid and received for the options involved.

For example, if the net cost of purchasing a spread is $200 and the difference in strike prices is $300, then the spread can still be successful.

Learn more about Spread success