On physical exam, paradoxical splitting is appreciated as increased splitting on expiration relative to inspiration, versus normal splitting where inspiration will increase splitting.
Horizontal, calendar spreads, or time spreads are created using options of the same underlying security, same strike prices but with different expiration dates.
Vertical spreads, or money spreads, are spreads involving options of the same underlying security, same expiration month, but at different strike prices.
This implied volatility is best regarded as a rescaling of option prices which makes comparisons between different strikes, expirations, and underlyings easier and more intuitive.
The maximum loss for this strategy is realised when, at expiration, the underlying has moved moderately bearishly to the price of the lower strike price.
