Profit is limited with a bull call spread so this is not the optimal strategy if big gains are expected. Even if BBUX rose to $45 by expiration in the previous example, the maximum net gain on the call spread would only be $0.50 while a trader who had only purchased the $38 calls ...
it is called abull put spread. The practical difference between the two lies in the timing of thecash flows. For the bull call spread, you pay upfront and seek profit later when it expires. For the bull put spread, you collect money upfront and seek to hold on to as much ...
Below the higher strike the short call is out of the money. The outcome at expiration therefore depends entirely on the long lower strike call. For example, if underlying price is at $47.67 at expiration, we will exercise the $45 strike call and gain $2.67 per share, or $267. The $50...
Maximum gain: Similar to a long stock position the price of XYZ really doesn’t have a theoretical limit to how high it can rise and therefore neither does the long call (at least up until expiration). Bull call spread example Now let's turn to trader #2 who also decides to buy the...
Example #1 Let us take the example of a trader who built a bull call spread, believing a particular stock will increase moderately before the options expiration. Let us assume that the underlying stock was trading at $110, and the trader purchased a call option with a strike price of $115...
Example of bull call spread Buy 1 XYZ 100 call at(3.30) Sell 1 XYZ 105 call at1.50 Net cost =(1.80) Maximum profit Potential profit is limited to the difference between the strike prices minus the net cost of the spread including commissions. In the example above, the difference between ...
Example:Stock XYZ at $67.93 per share. Buy the SEP 60 Call for $9.20 Write (Sell) the SEP 65 Call for $5.30 % Return =(Difference in strikes - Net Debit) / Net Debit % Return =(65 - 60 - (9.20 - 5.30)) / (9.20 - 5.30) = 1.10 / 3.90 = 28.2% ...
Bull Call Spread Example: Suppose you are moderately bullish on the Nifty 50 Index, so you buy 1 ATM option at 11700 CE, the premium being Rs.62, and sell 1 OTM at 11800 CE, the premium being Rs.19. The spot price of Nifty is 11720. ...
Apple Bull Call Spread Example Let’s look at another example, this time using Apple (AAPL). This bull call spread also uses the August expiry and involves buying the $190 strike call and selling the $235 strike call. This trade would cost $939 and have a maximum potential profit of $...
For example, if you paid a $1.00 premium for a bull call spread, you may simply exit the spread if the value falls to $.50. This method is simple but can be highly effective, especially when profit potential on the spreads is at least four times the risk. Possible Adjustments A ...