Options are an important derivative class that allows traders to take positions and generate profits with a limited amount of risks. Traders going long on options have to pay a premium whereas those going short/ writing the option charge premium. Apart from this, there are multiple option trading strategies that enable traders to further reduce their downside risk and increase the chances of profit-making based on different scenarios.
It is one of such options strategies that is used by traders when they have a moderately positive outlook of the market or stock. In this strategy, the investor goes long on the ATM call option and short on the OTM call option. It is to be ensured that both the options must have the same expiry date and are bought/sold in equal quantities.