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Options Strategies
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Bull Call Spread
| Strategies |
Bull Call Spread |
| Component |
Buy lower strike price/level call, sell higher strike price/level call of the same month |
| Potential Profit |
- When the stock price/index level is above the break-even point
- Limited to the difference between the two strike prices/levels minus the net premium paid
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| Maximum Loss |
Net premium paid |
| Time Value Impact |
Neutral |
| Break-even |
Lower strike price/level plus net premium paid |
| Remarks |
As different from a Bull Put Spread which would result in net premium received, a Bull Call Spread would result in net premium paid, as the premium for the lower strike price/level call is higher than that of the higher strike price/level call. |
Example
| Component |
Buy ABC May $190 Call, pay $30, and sell ABC May $220 Call, receive $10 |
| Net Premium |
Pay $30-$10=$20 |
| Break-even |
$190+$20=$210 |
| Profit when |
Stock price is above $210 |
| Potential Profit |
($220-$190)-$20=$10 |
| Potential Loss |
$20 |
| Time Value Impact |
Neutral |
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