There are a number of various option spread strategies that option non directional investors can utilize to generate income from the stock market without having to ‘predict’ market direction.

For example there is the butterfly spread, the iron condor, the diagonal (an/or the double diagonal), and the calendar spread, the double calendar spread – and, the Vertical Spread, which is sometimes also referred to as the Credit Spread.

In actuality, the vertical spread can be discovered inside found many of the previously talked about strategies. It is a core foundational trade to each of their makeup. Take for instance the iron condor. This trade is constructed from two separate vertical spreads – a put credit spread and a call credit spread – each positioned above and below where the underlying stock is currently trading at.

The butterfly position is also comprised of vertical spreads. The lower half portion of the butterfly spread is simply a vertical spread – as is the top half. Same goes with the iron butterfly. This trade also is built from verticals – a call vertical and a put vertical.

The vertical spread trade can be built from either call options or also put options.

Following is an illustration of a bear call vertical spread on the imaginary stock XYZ…

Sell 5 RIMM 50 Call Purchase 5 RIMM 50 Call

The vertical spread in the example above is a bearish position. Our hypothetical trader who placed this trade believed that RIMM would be moving lower – or staying in it’s general vicinity on the chart.

Even though the position in the example uses call options, it is a bearish position since it is constructed in such a way to be profitable if the stock being used (RIMM) heads down, or stays in the general area of where it is currently trading at.

If XYZ does in fact move downwards (or at least stay in the general area where it is currently trading at and NOT go up) this position will be a spread winning trade and the premium collected at the start of the trade can remain as profit in the traders account.

Looking for step by step instructions on how to trade the Vertical Spread, then visit www.verticalspread.net to learn this strategy as well as the Credit Spread option strategy.