<p>Vertical spreads are a strategy used in options trading to profit from price movements. They involve buying and selling options with the same underlying asset but different strike prices and the same expiration date. The key difference is that the options have different strike prices, hence the term 'vertical'.</p>

<h2>How It Works</h2>

<p>In a vertical spread, you buy one option and sell another with the same expiration date but a different strike price. The strike price of the option you sell is higher than the strike price of the option you buy. The difference between the strike prices is known as the <strong>width</strong> of the spread. Here's a simple breakdown:</p>

<ul>
  <li>You <strong>buy</strong> an option with a lower strike price.</li>
  <li>You <strong>sell</strong> an option with a higher strike price.</li>
  <li>Both options have the <strong>same expiration date</strong>.</li>
</ul>

<p>There are two types of vertical spreads: <strong>bull call spreads</strong> and <strong>bear put spreads</strong>. In a bull call spread, you expect the price of the underlying asset to rise. In a bear put spread, you expect the price to fall.</p>

<h2>Why It Matters for Traders</h2>

<p>Vertical spreads can be beneficial for traders in several ways:</p>

<ul>
  <li><strong>Limited Risk, Defined Reward</strong>: The maximum loss is limited to the net premium paid, and the maximum profit is limited to the width of the spread minus the net premium paid.</li>
  <li><strong>Reduced Cost</strong>: By selling an option, you reduce the net cost of the trade compared to buying an option outright.</li>
  <li><strong>Flexibility</strong>: Vertical spreads can be used in various market conditions, whether you expect the price to rise, fall, or remain relatively stable.</li>
</ul>

<h2>Example</h2>

<p>Let's say you expect the price of EUR/USD to rise. You could set up a bull call spread using MetaTrader 5 on STB Provider's platform. Here's how:</p>

<table>
  <tr>
    <th>Option Type</th>
    <th>Strike Price</th>
    <th>Expiration Date</th>
    <th>Premium Paid</th>
  </tr>
  <tr>
    <td>Call</td>
    <td>1.2000</td>
    <td>30 days</td>
    <td>$50</td>
  </tr>
  <tr>
    <td>Call</td>
    <td>1.2100</td>
    <td>30 days</td>
    <td>-$40</td>
  </tr>
</table>

<p>In this example, you buy a call option with a strike price of 1.2000 for $50, and sell a call option with a strike price of 1.2100 for $40. Your net cost is $10. If the price of EUR/USD rises above 1.2100 by the expiration date, you'll make a profit of $90 (the width of the spread minus the net premium paid).</p>

<h2>Key Takeaways</h2>

<ul>
  <li>Vertical spreads involve buying and selling options with the same expiration date but different strike prices.</li>
  <li>They can be used to profit from price movements in both bullish and bearish markets.</li>
  <li>They have limited risk and defined reward, with the maximum loss being the net premium paid.</li>
  <li>They can be set up using MetaTrader 5 on STB Provider's platform.</li>
</ul>