Credit Spread

A credit spread is an options strategy where you sell an option contract (giving someone the right to buy or sell a stock at a set price) and buy a different option contract to limit your risk. You pocket the difference in price between what you sell and what you buy—that's your profit if things go well. You'll encounter this when exploring options trading, which is a more advanced way to bet on stock price movements. It matters because it lets you generate income from stocks you think won't move much, while capping your potential losses. For example, you might sell the right to buy TechCorp stock at $100 and buy the right to buy it at $105, keeping the small difference as profit if the stock stays below $100.