- The Bull Call Spread - Bullish Strategy for Trading Options
- Bull Spread - Binary Options Trading Strategy
- Bull Put Spread | Options Trading at optionsXpress
The maximum loss is very limited. The worst that can happen is for the stock to be below the lower strike price at expiration. In that case, both call options expire worthless, and the loss incurred is simply the initial outlay for the position (the net debit).
The Bull Call Spread - Bullish Strategy for Trading Options
The maximum profit from the bull put spread is the premium received when the spread is established. The maximum loss is the difference between the strike prices less the premium received.
Bull Spread - Binary Options Trading Strategy
You simply could buy either the stock or a single call, but by purchasing the bull call spread you are able to better limit your risk. In Kearney&rsquo s example, we put on the 65-75 vertical call spread, which consists of buying one in-the-money 65 call and selling one out-of-the-money 75 call. Because we sold the 75 call, we limit the maximum value of our spread to $65 (minus commissions), but we lower our breakeven for the trade because of the credit we earned selling the 75 call. Additionally, our loss is limited to the cost of the spread.
Bull Put Spread | Options Trading at optionsXpress
This strategy consists of being long one call and short another call with a higher strike, and short one put with a long put on a lower strike. Typically, the call strikes are above and the put strikes below the current level of underlying stock, and the distance between the call strikes equals the distance between the put strikes. All options must have the same expiration date.
So we need to sell the $55 Call which we bought earlier, and buy back the $55 Call that we sold earlier. So we sell the $55 Call for $6, and buy the $55 Call back for $6. This transaction has earned us $5, resulting in a nett gain of $, taking into account the $ we spent earlier.
A Butterfly spread is an option strategy combining a bull and bear spread. It uses three strike prices. The lower two strike prices are used in the bull spread, and the higher strike price in the bear spread. Both Puts and Calls can be used. This is a strategy having both limited risk and limited profit.
As with the Bull Call Spread, the potential profit is limited, as the maximum amount that can be earned is the net premium received at the outset. However, the risk is limited as well.
This means you have the chance to make a bigger return on your investment than you would by simply buying calls, and also have reduced losses if the underlying security falls in value. This is a simple strategy, which appeals to many traders, and you know exactly how much you stand to lose at the point of putting the spread on.
The calls you have bought in Leg A will be worth around $8 each, for a total of $955. The ones you have written in Leg B will have a liability of around $8 each for a total of $855. You will have made a profit of approximately $655.