Help me with the intuition.
Binary credit options are on the underlying, so we buy a put option. But credit spread options are on the spread, so we buy a call, right? So buying a credit spread PUT option is betting on an improvement in the spread?
put option pay off : X spread-Spot spread
in order to make money from the position, we are betting that spot will go down, so X-S is positive.
betting spot spread going down is like betting on improvement in quality of bond.
Same thing with forwards, just replace strike spread with forward spread