Net Credit Spread

A Net Credit Spread is an option purchase and an option sale in the same class and expiration but different strike prices.

• See: Credit Market, Stock Option, Corporate Debt.

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References

2018

• St. Louis FRED. “Moody's Seasoned Baa Corporate Bond Yield Relative to Yield on 10-Year Treasury Constant Maturity (BAA10Y)."
  • QUOTE: Series is calculated as the spread between Moody's Seasoned Baa Corporate Bond© (https://fred.stlouisfed.org/series/DBAA) and 10-Year Treasury Constant Maturity (https://fred.stlouisfed.org/series/DGS10). ...

2018

• "Stock Markets Are Wild, but Bond Markets Can Be Dangerous." In: The New York Times, (2018-12-18).
  • QUOTE: ... The difference between the low interest rate that the government pays and the higher rate of another borrower is called the credit spread. Riskier borrowers typically have larger spreads. ...

    ... Netflix has gone from having very little debt in 2010 to having more than $10 billion now. Verizon now has $113 billion of debt, more than double the amount it had six years ago. By one measure, the ratio of corporate debt to G.D.P., the total level of borrowing is at all-time highs.

2015

• (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/Credit_spread_(options) Retrieved:2015-10-2.
  • In finance, a credit spread, or net credit spread, involves a purchase of one option and a sale of another option in the same class and expiration but different strike prices. Investors receive a net credit for entering the position, and want the spreads to narrow or expire for profit. In contrast, an investor would have to pay to enter a debit spread. In this context, "to narrow" means that the option sold by the trader is in the money at expiration, but by an amount that is less than the net premium received; in which event the trade is profitable but by less than the maximum that would be realized if both options of the spread were to expire worthless.

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