Bear call spreads vertical call options


This article originally appeared bear call spreads vertical call options The Options Insider Web site.In the first article of this five-part series on vertical spreads, I introduced the concept of verticals and defined their four main veertical. First let me break that name down for you. The adjective (bear) modifies the noun (call). A bear call spread is built with call options, yet it is a bearish strategy.

DescriptionA bear call spread is a type of vertical spread. It contains two calls with the same expiration but different strikes. DescriptionA bull call spread is a type of vertical spread. The strike price of the short call is higher than the strike of spteads long call, which means this strategy will always require an initial outlay (debit).

Unlike the call buying strategy which have unlimited profit potential, the maximum profit generatedby call spreads are limited but they are also, however, comparatively cheaper to implement. Additionally, unlike theoutright purchase of call options which can only be employed by bullish investors, call spreads can be constructedto profit from a bull, bear or neutral market.

Vertical Call SpreadOne of the most basic spread strategies to implement in options trading is the vertical spread. A verticalcall opyions is created when the short calls and the long calls have the same expiration date but different strikeprices. Vertical call spreads can be bullish or bearish. A bear call spread is an option strategy that involves the sale of a call option, and the simultaneous verticl of a different call option (on the same underlying asset) with the same expiration date but a higher strike price.

A bear call spread is one of the four basic types of vertical spreads. As the strike price of the call sold is lower than the strike price of the call beag in a bear call spread, the option premium received for the call sold (i.e. the short call leg) sprrads always more than the premium amount paid for the call purchased (i.e. the long call leg). Since initiation of vvertical bear call spread results in receipt of an upfront premium, it is also known as a credi.




Spreads call bear options vertical call

Spreads call bear options vertical call