Spreads

An Option spread, the way i remember this stuff is by using these initials. ESSD.

Equal number of options
Same Class
Same Underlying Stock
Different strike or expiration

It's a buy and sell of the option so short call, sell and long call buy. Written and purchased on the same stock, same amount with a different strike or expiration date.

Two calls is a call spread, two puts is a put spread.

There are many spreads to do and most investors stick to basics, few however use exotic spreads.

Basics are bull and bear spreads. Bull meaning the object of the strategy is to have the underlying stock go up in value whereas the bear spread is the opposite.

Debit spreads and credit spreads are also basic strategies used.

The margin requirement on any spread is simply the same as a naked option. So whichever side is the sell would be the naked part and that's where you'd figure the option requirement. so 20% of the underlying stock price plus premium.