542A COMPleTe gUIde TO THe FUTUreS MArKeT
 Other Spread Strategies 
 Money spreads represent only one class of option spreads. A complete discussion of option spread 
strategies would require a substantial extension of this section—a degree of detail beyond the scope 
of this presentation. The following are examples of some other types of spreads. 
time spread.  A time spread is a spread between two calls or two puts with the same strike price, 
but a diff  erent expiration date. An example of a time spread would be: long 1 August $1,300 
gold futures call/short 1 december $1,300 gold futures call. Time spreads are more complex 
than the other strategies discussed in this section, because the profi  t/loss profi  le at the time 
of expiration cannot be precisely predetermined, but rather must be estimated on the basis of 
theoretical valuation models. 
Diagonal spread.  This is a spread between two calls or two puts that diff  er in terms of both the 
strike price and the expiration date. An example of a diagonal spread would be: long 1 August 
$1,200 gold futures call/short 1 december $1,250 gold futures call. In eff  ect, this type of 
spread combines the money spread and the time spread into one trade. 
butterfl  y spread.  This is a three-legged spread in which the options have the same expiration 
date but diff  er in strike prices. A butterfl  y spread using calls consists of two short calls at a given 
strike price, one long call at a higher strike price, and one long call at a lower strike price.   
 The list of types of option spreads can be significantly extended, but the above examples 
should be sufficient to give the reader some idea of the potential range of complexity of spread 
Price of August gold futures at option expiration ($/oz)
Profit/loss at expiration ($)
1,000
3,750
5,000
2,500
0
−1,250
−2,500
1,250
1,050 1,100 1,150 1,200 1,250
Breakeven price
= $1,140.20
1,300 1,350 1,400
Futures price at time
of position initiation
    FIGURE   35.21    Profi  t/loss Profi  le; Bear Put Money Spread (Short Put with lower Strike Price/
long Put with Higher Strike Price)