What are option spreads and when can we use them for options trading?

Spreads are a kind of a long/short that we have previously seen but they are a little more complicated and sophisticated. Let us look at two such examples. An option spread can be used in case of moderately bullish or moderately bearish situations. An option spread combines buying a lower strike call and selling a higher strike call. Alternatively, you can also buy a higher strike put and sell a lower strike put if you are moderately bearish. The premium received on one option reduces the cost of the other option and the risk is limited. One can also effectively use calendar spreads wherein you buy in one contract and sell in the other contract. The idea is not take a view but to capitalize on mispricing. Both these strategies work effectively in lacklustre markets. Next time you find the markets literally going nowhere, you need not sit and blame the markets. You can actually pick up your bag of option tricks and actually make money out of such lacklustre markets.