What Is A Bull Call Spread?

bull call spread calculator

For example, if the original bull call spread has a March expiration date and cost $2.00, an investor could sell-to-close (STC) the entire spread and buy-to-open (BTO) a new position in April. If this results in a $1.00 debit, the maximum profit potential decreases by $100 per contract and the maximum loss increases by $100 per contract. Bull call debit spreads have a finite amount of time to be profitable and have multiple factors working against their success. If the underlying stock does not move far enough, fast enough, or volatility decreases, the spread will lose value rapidly and result in a loss.

bull call spread calculator

Call debit spreads benefit when the underlying security’s price increases. The underlying stock should move up to a long call strike plus the net premium paid on each share to achieve break-even. Hence, if the underlying stock closes at $136.51 ($135 + $1.51) on the expiration, bull call spread calculator there would neither profit nor loss on our bull call spread. Cell F9 is the price for which the lower strike call option is bought when opening the position. Cell F10 is the price for which the higher strike short call option is sold when opening the position.

Strategy discussion

Article copyright 2013 by Chicago Board Options Exchange, Inc (CBOE). The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data. Factoring in net commissions, the investor would be left with a net loss of $7. Factoring in net commissions, the investor would be left with a net gain of $3.

bull call spread calculator

In the language of options, this is a “near-zero vega.” Vega estimates how much an option price changes as the level of volatility changes and other factors are unchanged. However, one significant drawback from using a bull call spread is that potential gains are limited. For example, in the example above, the maximum gain Jorge can realize is only $27 due to the short call option position.

How To Calculate Partial Profit

The calculations, information, and opinions on this site are for educational purposes only and are not investment advice. Calculations are estimates and do not https://www.bigshotrading.info/ account for all market conditions and events. The 7700 PE will not have any intrinsic value, hence we will lose all the premium that we have paid i.e Rs.72.


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