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Bull Spread Calculator

Montag, November 29, 2021


A bullish or bull call spread is another option spread strategy that we should consider when we do not have enough money to pay the price of the contracts we desire to buy. When you establish a bullish position using a credit put spread, the premium you pay for the option purchased is lower than the premium you receive from the option sold. The recommendation, this is not a strategy that should be executed very often unless there is evidence of an expected upward movement. Without that it’s a lower probability of success trade that relies on a stock to trade higher. It requires less capital to participate than simply purchasing stock, which means lower risk, but is still considered to be a lower probability of success trade.

profit potential
spread was established

A complete loss occurs anywhere below the lower purchased call strike price ($52.50) which amounts to the entire premium paid of $42. To illustrate, the call option strike price sold is $55.00 and the call option strike price purchased is $52.50; therefore, the difference is $250 [($55.00 – $52.50) x 100 shares/contract]. Also, the trader will sell the further out-of-the money call strike price at $55.00. By selling this call, the trader will receive $18 ($0.18 x 100 shares/contract).

Long Put Butterfly

Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data. Make sure the trade is worth your while – make sure the premium you are paying is low enough that you are still making money if the price rises. There are two significant bull variants spread – bull call spread and bull put spread.

The bull call spread option strategy consists of two call options that create a range that outlines a lower strike point and an upper strike point. The bullish call spread strategy helps to cap loss if the price of an asset drops, however, the strategy also caps the amount of potential gains in case of a price increase. Bullish investors often use this when trading futures, bonds, and equities.

To learn more about bull call spread option strategy click here. Enter the higher strike price, lower strike price, and premium into the calculator to determine the butterfly spread maximum profit per option. For example, if you sell a bull put spread for a net credit of $0.92, the most you can make on the trade is $92 per contract if the underlying price is above the short put strike at expiration.

  • If this strategy is initiated at even money, then breakeven is anywhere that all the options expire worthless, i.e., between the lower call strike and upper put strike.
  • This technique is useful to bullish investors who believe the price will go up.
  • However, the biggest disadvantage is we are eliminating the unlimited side of the profits that a call option would provide us.
  • If this happens, you will exercise your 80 calls and acquire 1,000 shares of XYZ at a cost of $80,000.
  • The following formulas show the bear put maximum loss , bear put maximum potential profit , and the breakeven price .
  • Risk-reward RatioThe risk-reward ratio is the measure used by the investors during the trading for knowing their potential loss to the potential profit.

We will start by explaining what an option spread is, and then move on to discussing the concepts of credit spread and debit spread option, and wrap up with some examples. Dividend Ex-Date- the first day on which the stock trades without the dividend. If you wish to receive the dividend, you must own the stock by theclose of market on the day before theDividend Ex-Date. Many times, a covered call is exercised early so the buyer canown the stock and collect the dividend. This typically happens to ITM options the day before the Dividend Ex-Date.

Limited Risk

Consider using a bear put spread when a moderate to significant downside is expected in a stock or index and volatility is rising. Bear put spreads can also be considered during periods of low volatility to reduce the dollar amounts of premiums paid, such as to hedge long positions after a strong bull market. Consider using a bull call spread when calls are expensive due to elevated volatility and you expect moderate upside rather than huge gains.

Short puts are generally assigned at expiration when the stock price is below the strike price. To calculate the butterfly spread profit, subtract the lower strike price and the premium from the highest strike price. Going by the above example, it is clear that even though the trader’s view was correct, he still had to book loss in 2 out of the three cases. Only when the stock rises much above the anticipated level, a trader could book some profit.

A Bull Call debit spread is a long call options spread strategy where you expect the underlying security to increase in value. Within the same expiration, buy a call and sell a higher strike call. Risk is limited to the debit or premium paid , which is the difference between what you paid for the long call and short call. Profit is limited to the difference in strike values minus the debit . The bull call strategy succeeds if the underlying security price is above the higher or sold strike at expiration. The above diagram represents the payoff of the bull spread strategy.

Marginal revenue

It is interesting to compare this https://forex-world.net/ to the bull put spread. The profit/loss payoff profiles are exactly the same, once adjusted for the net cost to carry. The bull call spread requires a known initial outlay for an unknown eventual return; the bull put spread produces a known initial cash inflow in exchange for a possible outlay later on. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day….

This maximum profit of $1,500 will occur at all prices above $70. A bull vertical spread requires the simultaneous purchase and sale of options with different strike prices, but of the same class and expiration date. A vertical spread involves the simultaneous buying and selling of options of the same type and expiry, but at different strike prices.


If the stock price is “close to” or above the strike price of the short put , then the price of the bull put spread decreases with passing of time. This happens because the short put is closest to the money and erodes faster than the long put. However, if the stock price is “close to” or below the strike price of the long put , then the price of the bull put spread increases with passing time.

If the trader expects the stock to move higher, but only $1 higher, then buying the $52.50/$55.00 Bull Call Spread would be foolish. From beginner to advanced, our intricate web of stock analysts and professional traders will help you in making the right choices for your account. The motivation of the strategy is to generate a profit if the stock rises, but make the strategy cheaper than simply buying a call option.

Clicking on the chart icon on the Bull Call Screener/Bull Put Screener loads the calculator with a selected bull call or bull put position. The Bull Put Calculator can be used to chart theoretical profit and loss (P&L) for bull put positions. This is the risk-defined benefit often discussed as a reason to trade options.

A https://bigbostrade.com/ call spread can be used in place of an outright sale of uncovered call options. You can then sell your shares at the market price of $69 for $69,000. You can then sell your shares at the market price of $68.50, for $68,500. You can then sell your shares at the market price of $67, for $67,000. For this strategy, the net effect of time decay is somewhat neutral. It’s eroding the value of the option you purchased and the option you sold .

However, if the underlying price falls between the two strikes of the bull call spread, we will enter the area of the curve where we could either make a profit or a loss. If the underlying falls below $14 at expiration, the call bought will start to lose its value quickly, while the call sold will expire without value. 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.

Options Guy’s Tips

The problem is most acute if the stock is trading just below, at or just above the short call strike. This strategy breaks even at expiration if the stock price is above the lower strike by the amount of the initial outlay . In that case, the short call would expire worthless and the long call’s intrinsic value would equal the debit.

If you have an inkling that the https://forexarticles.net/ of a contract is going to rise moderately, and the market is exceptionally volatile, a bull call spread would be the trade to use. As we mentioned, you want to use this during times of volatility because it caps your max losses. While you may not be able to make as much money in the long run, the security of knowing how much you can potentially lose during a volatile market is a fair trade off. The bull call debit spread strategy consists of buying a call contract with a strike price that is below the strike price of the second call contract sold. Maximum loss results when the stock is trading below $30 or above $50. Above $50, any „profit“ from the two long calls will be neutralised by the „loss“ from the two short calls.

The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Examples are not intended to be reflective of results you can expect to achieve.

Given the put-call parity, it is possible to construct a bull spread strategy using call options or put options. Consider using a bull put spread to earn premium income in sideways to marginally higher markets, or to buy stocks at reduced prices when markets are choppy. A bull put spread, also known as a put credit spread or short put spread, has limited profit potential. The credit received at entry is the maximum profit possible for the position.

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