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Spread option
       
 
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Spread option

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Spread option
The Underlying for a spread Option is the price differential between two assets (a difference Option) or the same asset at different times or places. An example of a financial difference Option is the Credit spread Option, the Underlying for which is the spread between two Debt issues, which derives from the relative Credit Rating of the issuers. Another is the cross-Currency Cap, where the Underlying is the spread between Interest rates in two different currencies. A Calendar spread, a pair of options with the same Strike Price but different maturities, pays out the price difference for a single asset on two different dates. Spread options, including calendar spreads, are particularly popular in the commodity markets.
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