What do investors in spreads typically not expect?

Investors in spreads typically do not expect volatility because spreads involve taking advantage of the price difference between multiple securities, often based on differing risk levels or market conditions. When engaging in spread strategies, investors aim for more predictable, linear outcomes rather than large price fluctuations.

For instance, in a bullish spread, an investor might simultaneously buy a call option at a lower strike price while selling a call option at a higher strike price. This strategy depends on the assumption that while the market may move in their favor, the underlying prices will not fluctuate wildly, enabling them to secure profits from the difference in premiums rather than from volatile market movements.

In contrast, expectancies like price stability or increased liquidity often align with the goals of spread investors. Price stability is critical as it reduces the risk of large losses from adverse price movements. Increased liquidity allows these investors to enter and exit positions more easily, which is also favorable for their strategies. While investors may be aware of potential market downturns, their specific approach in managing spreads focuses more on mitigating risks associated with volatility rather than solely predicting market direction.