Credit Spread
An options spread where the premium received from selling options exceeds the premium paid for buying options, resulting in a net credit.
Explanation
Credit spreads are popular income strategies that benefit from time decay and the underlying staying within a specific range. The maximum profit is the net credit received, while the maximum loss is the width of the spread minus the credit. Common examples include bull put spreads and bear call spreads.
Example
Sell the 145 put and buy the 140 put on AAPL for a net credit of $1.20. Max profit is $1.20 if AAPL stays above $145.