Saturday, 18 July 2015

OPTION STEATGEY : BULL CALL SPREAD

Bull Call Spread
  • In a bull call spread strategy; an investor will simultaneously buy call options at a specific strike price and sell the same number of calls at a higher strike price. Both call options will have the same expiration month and underlying asset. This type of strategy is often used when an investor is bullish and expects a moderate rise in the price of the underlying asset.

  • Bull call spreads can be implemented by buying an at-the-money call option while simultaneously writing a higher striking out-of-the-money call option of the same underlying security and the same expiration month.
    By shorting the out-of-the-money call, the options trader reduces the cost of establishig the bullish position but forgoes the chance of making a large profit in the event that the underlying asset price skyrockets. The bull call spread option strategy is also known as the bull call debit spread as a debit is taken upon entering the trade.
 

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