RT Journal Article SR Electronic T1 Vertical Spread Design JF The Journal of Derivatives FD Institutional Investor Journals SP 28 OP 46 DO 10.3905/jod.2005.479377 VO 12 IS 3 A1 J. Scott Chaput A1 Louis H. Ederington YR 2005 UL https://pm-research.com/content/12/3/28.abstract AB Spread trades represent about 10% of total activity in the market for large eurodollar futures options trades. The practitioner literature offers a variety of reasons for spread trading, but which of them are the most important to traders? Are they taking speculative long positions in one option and then selling off some of the upside potential to reduce cost and increase leverage? Are they taking speculative short options positions but then buying protection on the downside to limit the loss in case they are wrong? Are they spreading primarily to manage overall position gamma or vega? What about spreads with an additional position in the underlying futures contract, or in a third option (a “seagull”)? In this article, Chaput and Ederington provide answers to these questions and a number of others, based on their analysis of a unique data set gathered at the Chicago Mercantile Exchange.