A bull spread is an optimistic option strategy used when an investor expects a moderate increase in the price of the underlying asset.
There are two types of bullish spreads: bullish call spreads using call options and bullish put spreads using put options.
Bullish spreads involve the simultaneous buying and selling of options with the same expiration date on the same asset, but with different strike prices.
Bullish spreads reach maximum profit if the underlying closes at or above a higher strike price.
A horizontal spread is a simultaneous long and short position in derivatives for the same underlying asset and strike price, but with different expiration dates.
Boundary conditions were used to establish the minimum and maximum possible values of call and put options prior to the introduction of binomial tree and Black-Scholes pricing models.
Deep-in-the-money options have strike prices that are significantly above or below the market price of the underlying asset and thus contain mostly intrinsic value.
Delta hedging is an options strategy that aims to be directional neutral by establishing compensating long and short positions in the same underlying asset.
The extrinsic value is the difference between the market price of an option, also known as its premium, and its intrinsic price, which is the difference between the strike price of the option and the price of the underlying asset.