Bull Call Spread TUTORIAL [Vertical Spread Options Strategy]
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- เผยแพร่เมื่อ 30 ก.ย. 2024
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The bull call spread is a bullish options strategy consisting of two separate call option transactions. One call option is purchased and another call option at a higher strike price is sold (same expiration cycle).
The bull call spread is one of the four vertical spread strategies.
The strategy has many other names that options traders use, including the long call spread, call debit spread, and simply buying a call spread.
In this video, we'll cover:
- Bull call spread explained (setup, explanation, max profit potential, max loss potential, breakevens)
- Historical trade examples so you can see exactly how the bull call spread strategy has performed in the past in various scenarios.
- A demonstration of setting up a bull call spread on the tastyworks trading platform (including a live trade entry/exit so you can see exactly how easy it is to enter and exit call spread positions).
Be sure to leave a comment down below with any questions you may have!
=== RECOMMENDED VIDEOS/RESOURCES ===
Vertical Spreads (Basics for Beginners): www.projectfin...
Options Trading For Beginners (PLAYLIST): • Become an Options Trad...
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Option Pricing EXPLAINED: • Option Prices EXPLAINE...
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✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
It's incredible: In all of your videos I don't think you've ever blinked. Impressive.
Haha only the older ones / first ones where I'm on the camera. These old vids are bad!
@@projectfinance They're all very helpful dude, thank you!
@@projectfinance Also, this is probably a stupid question, but in example 1, how is it that the 70 call expires worthless still if the stock price remains below the 70 strike? You want the stock to expire below the strike price when you sell a call option, right?
@@notes_from_under_ground yes.... price IS below 70 so the call is therefore worthless because the stock price did not exceed 70.....ITS A CALL ,,SO PRICE NEEDS TO BE ABOVE THE STRIKE (70)TO BE WORTH ANYTHING...the call option is worthless to the person who bought it from you...
@@jackf498 What happens if the call that you sell in the vertical spread also goes in the money do you have to sell 100 shares to who buys the call? I thought the maximum outlay is the cost of the vertical spread?
This is helpful to all those newbis out there...Also I will be Recommending expert Robert Anderson for all the beginners who lost and will want to recover all their lost so far. I have been benefiting a lot from him and he also guided me on how to retain my earnings each year, tax information for trades, LLC and trading. Basically to avoid harsh taxes.
Wow, tax management is priceless.
I have seen different recommendations about expert Robert, he must be very exceptional for people to talk about him like this. But I still have a bitter experience with this PROs
I'm a beginner in stock trading, Please how do I get informed about stock trading?
@@cityprepping4660 Well said, but there are experts who dedicate their time and resources to study the different strategies and mastered them, this are people we should go for trading advice
@@mildredlevine2691 As a newbie, it's best to avoid jumping in forex trade without expert guidance
Thank you, thank you, thank you!!!.......Excellent video. I've been searching YT on this subject and trying to wrap my head around how bull call spreads work for over 2 weeks. Your video has finally explained this concept in laymen's terms and the light bulb has finally went off in my head! .......BTW, I also hit that ravishing "like" button (Sorry Charlie, ZipTrader) as well as the "subscribe" button.
Awesome! Thanks so much for the comment. I'm glad the video was helpful. I'm all about trying to help people get to that light bulb moment!
-Chris
Nice Video! Sorry for butting in, I would appreciate your initial thoughts. Have you heard about - Genevi Sonadelyn Eradicator (erm, check it on google should be there)? It is a good exclusive product for making money using this effective options system minus the headache. Ive heard some great things about it and my cousin at last got astronomical success with it.
Great examples and explanations!! This guy is El Profesor
Thank you! Quick question regarding the when you buy a spread that is already in the money: Since you don't have to hold the position through expiration, can close your position that same day since maximum profit potential is attained? In this example FB only had to reach 175 for max profit, but it was already at 178.22, so what makes it to where you can't immediately close your position?
Thanks!
It took me a while to figure this out as well. You're paying more for that option than the option value, so you'll definitely want to wait for it to go up. The 49 strike call would only be worth the difference between the current price--57.47--and 49 dollars, so you wouldn't want to exercise the option, because it's only worth 8.47 right now, which is less than the 11.10 that you paid. It also works like an insurance policy against the one you sold if the stock takes a huge run. I hope that helps.
Thank you for a no BS - super-secret strategy as so many firms tout these days. I want to learn and this video and some others on Vertical spreads are generally to the point! Thanks again!
This is a great explanation. I love how you walk through actual examples.
R ed g
thanks for great video. How can I setup 75% profit limit on Call debit spread and put credit spread?
Why is this dude smirking 100% of the time?
can someone explain me how the short option at 7:15 went worthless. I thought that while you short you have to rebuy the a call with the same strikeprice. You hope the stock price drops so you can buy your new call for less. In this example the stock price drops, so I would think you make profit out of the short call. The video's says that it will expire worthless. Can someone tell me why pls? Maybe @projectoption?
I'm also wondering the same thing.
If the stock price is at $149.81 at expiration, it is below $155 which is the strike and you wouldn't be exercised and it'd expire worthless. You're right about buying back, but if you wait until expiration and the stock price is below the strike it means extrinsic value is $0 and intrinsic value is $0 as well, so you can relate as if you were buying back for $0. If you buy back before expiration, you will have to pay something (maybe just a few cents).
@@sonecah99 thank you!
how do you calculate the spread price P&L with time decay in 10:58? is there a formula?
Could you explain a straight call without the spread? Is there a break even? What is the disadvantage? Greater profit?
Thank you for showing real time charts in your videos. Your content is great, charts just make it awesome!
Thank you for the awesome comment!
When you go to close the position you must close both legs of the trade correct(As in one trade)?You cant close individual legs when they become profitable correct?Also can you close this trade at anytime before expiration?
Loved this video. It is the most clear and well-explained I could find. The chart examples were key. Really good job!!
i enjoy the video very much, but one question: why wait for expiration? can I take my P/L anytime I want just like selling your stocks, your puts, calls anytime I want?
Yes, you can take profits / close the trade whenever you want. You'd do that by selling the call spread you own (sell the long call, buy the short call) and you can do that in one transaction.
I have a question on example 2. Why would someone buy a 575 call if the stock price is $569.92? Wouldnt that be considered out of the money? Should we focus on buying in the money calls and selling an out of the money call for bull call spreads?
I love how your videos are not too simple like most of what TH-camrs do. I actually learn stuff from your videos. Cheers.
Thanks for your comment!
Thanks a lot, it was great explanation and visuals.
Appreciate the full breakdown, finally saw a video or resource explains how expiration and closing works, thanks a lot!
Dude, you're awesome!!! Thank you so so much!
When did Billy Corgan get into option trading?
In the example you have explained, If the system generate my maximum profit to be $200, does that take into account the money I use to place the trade too?
Say I used $400 to place a trade and the system generates my maximum profit to show $200, does that add up to $400(My trade money) + $200(Maximum profit) or I’m at a lost of $200?
If you see a profit of $200, that means your position increased by $200 from your initial purchase price of $400 (the position is now worth $600).
Million thanks for explaining 👍
Chris- THANK YOU!!!! You save me a lot of time from studying Options! great content!
Thank you for the video! Very well explained :) I have a question regarding the situation where you buy a spread that is already in the money: higher loss potential and lower profits but higher probability of being profitable at expiration. This may seem dumb from my part, but you mentioned earlier in the video that the owner of the spread does not have to hold the position through expiration but can sell as soon as the maximum profit potential is attained. In that case: how does it work if you purchase a spread that is already very close to reaching full profit like at @24.58 and want to exit? I'm sure I'm missing something. Thank you!
For it to be that close to maximum profit already, that would mean the spread is very close. So the maximum profit wouldn’t be very high at all per contract. This would be used more as leverage if you’re not sure which direction the stock will go just yet, but want to get in without risking IV crush if it dives instantly if you just picked a regular call option. This particular type of option makes more profit when the spread is farther apart, and for that to reach maximum potential quickly would require a massive gap up. So if you think a gamma or short squeeze is coming this would be an option to use if the strike prices are juiced up but you still want in with less capital at risk.
Thank you!! Awesome explanation.
I have one question...can we only get max profit in bull call spread only at expiration, not before right ?even if the stock price is substantially higher than the short call you still can't make max profit by closing the spread before expiration right?...please answer iam.lil confused here..thanks!!
Typically u get max profit at expiration but if before expiration, share price hits your short strike price, you should consider to close your position prematurely as the profit difference at this point vs max profit at expiration may not be very significant. Analyse the trade with your time curve to confirm this. With time balance you are risking it since share price can come down.
@@JK-vb9ps thanks!!😊
Ok, I’m in for a three hour lesson! Looking forward to it!
THANK YOU!!!! YOU ARE THE COOLEST
I wish i could like this video 10 more times
I got one more for ua
Do you need a lot of capital to open a bull call spread? Lets say the stock is at 155 u buy the 155 call and sell the 160put for contract expiring next week. Lets say next week the stock is at 170 and u get an early assignment for the 160 put, what happens next? Ur forced to sell 100 shares at 160 for 16000, but now u have to buy the 100 shares at 150 at 15000 and u keep rest of the profit right. But what if you dont have enough capital to buy 100 shares at 150, what happens next. Sorry im little confused.
Been studying your videos over the weekend (big fan of your videos) and started practicing with a paper money account today. Today I bought a TSLA 410/420 call spread for $1.70 expiring Sept 18 . Both my long call ($410) and short call ($420) closed ITM. The profit on the day is $305 but not yet 50% of the maximum profit of $830. What is the risk of letting the short call stay ITM towards expiration? What happens if the call holder exercises early? Do I need margin to cover? Or will I be able to offset the exercise with my $410 call? Wondering because my live account will start small and will only have a small amount of margin (Canadian too if that matters). Not enough funds to sell someone 100 shares lol. Curious about this. Thanks a lot!
Thank you for the video!! Best explanation that I've seen!
With a call debit spread, because time decay doesn't negatively impact your profit, would it be more beneficial to wait until Wednesday/Thursday to buy a weekly spread? Seems like it would be cheaper but your profit would still be the difference between the strikes right?
Not always the case. The long call, being further in the money, will have less extrinsic value to decay away than the short call on the higher strike. Therefore, all other things being equal, you will generally find that the closer you are to expiration, particularly in those last few days, the same spread will cost you more to enter. OTOH, there may be less risk since there is not as much time left before expiration for things to go awry on you.
Bro, u r awsm, i learned a lot of ur channel , God bless u
Thank you for the comment! More videos coming soon so stay tuned!
Love your videos Chris. Thank you very much for the education. I do have a question on my recent Debit Call Spread of AAPL. Here are my opening transactions.
08/07/2020 Sold 1 AAPL Oct 16 2020 465.0 Call @ 19.6 1 AAPL Oct 16 2020 465.0 Call 19.60 0.65 1959.29
08/07/2020 Bought 1 AAPL Oct 16 2020 450.0 Call @ 25.6 1 AAPL Oct 16 2020 450.0 Call 25.60 0.65 -2560.67
When I opened this spread, AAPL' was trading at around 445. As you can see my spread was 15$ and I paid $600 for this. On 8/18 when the stock was trading at around 463 I decided to close the spread as it is just below the maximum spread value ($13). I was expecting a profit of (13-6)*100=$700. However my profit was about $180. Here are my closing transactions
08/18/2020 Bought 1 AAPL Oct 16 2020 465.0 Call @ 25.3 1 AAPL Oct 16 2020 465.0 Call 25.30 0.65 -2530.67
08/18/2020 Sold 1 AAPL Oct 16 2020 450.0 Call @ 33.1 1 AAPL Oct 16 2020 450.0 Call 33.10 0.65 3309.26
At the end, the profit turned out to be (option premium differential from closing transactions - option premium differential from opening transactions)*100. Does it mean that maximum profit or close to it can only be realized at expiration if the stock is at or above the short call strike price? What am I missing here?
I can't get my head around why the 155 Call is worthless where the stock price is below 145 or even 149.81. This side of the option was sold not bought so by selling doesn't this mean we want the price to be below 155 which it is?
No they're referring to the call that you sold. The call that you sold expired worthless which is what you want. Focus on the actual option that's being referred to Not Your Action on it. If you sell a call you want that call to expire worthless otherwise you responsible for buying it back and executing for those 100 shares
@@tchaasminw1580 Many thanks for the response, I get it now
So, I'm just stupid but help me anyway, okay? I really like your presentations, BTW. I did a Call spread in which I bought the 95 Calls and sold the 105 calls. The stock price (NBIX) is way up to $119+. So....is my profit going to be the spread strike diff. of $10 X the 100 multiplier per contract? Or...do i have to subtract the amount i paid for the Calls? In that case it's a huge loser.
Hi Chris, I have just started learning Option watching ur videos, Could you please help in clarifying the doubt :
At 575/635 Bull Call Spread,when the current Price is 530, why there is a loss of $2,145. With the sell option of 635, the trader will sell it with the Profit of $105 and a loss of $45 on purchase of 575 call. Isn't the Net impact will be $60-cost of an Option. Please help in understanding this !!!
Is selling the Call Option same as Put Option
Hello,, if I consider
Current Stock Price: 171.75
Call Options
Sell: 172.00 1k Positions
Buy: 174 1K Positions and also
Buy: 173 700 Positions
I want to know the name of the strategy?
hi at 16:36, the 39 spread price.. was the price set by the market. If expired at the short call price, spread price would have been 60 USD, right? thanks
Will this be considered a Day Trade. Either if I buy them together in the same transaction or in individual transactions just a few seconds apart. I have not yet tried this. I use Robinhood and actually have about 5 (PMCC) I entered into the (2-Step Strategy) with my Long Leg deep (ITM) and about a year long, and my short legs (OTM) are either weekly or monthly end dates. I did not hit with any (Day Trade) Marks and I thought for sure I would having an account un $25,000. So my questions is does this Strategy considered a (Day/Trade) because both legs have the same expiration date and were purchased at the same time with a Buy/Sell transaction and if so I am assuming I will get hit with another (Day Trade) if the (Stock) Price reaches or surpasses my (Sell/Call) Short Leg triggering me to have to exercise my now (ITM) Buy/Call Long Leg on the same day to cover the shares. Please let me know if this is true.
Nice explanation, is there anyway to get assigned stock? If you let it expire?
You can get assigned if your short call ends up very deep in-the-money or if you hold it through expiration. You won't get assigned on a short call unless there's very little extrinsic value in the call. Please watch this video for more information on this, it's very important to understand so you don't worry yourself too much: th-cam.com/video/7pTb1a5IgKM/w-d-xo.html
But if your short call is in-the-money at expiration, your long call is too, and the exercise/assignment will offset:
Long Call Automatically Exercised: You'll buy 100 shares at the long call's strike.
Short Call Assigned: You'll sell 100 shares at the short call's strike.
The two offset and you'll have no share position, but you'll pay exercise/assignment fees. It's best to close spreads before expiration, especially if they are in-the-money.
@@projectfinance thanks , good videos, question, you use tastyworks, so do I. How accurate is the p/l theo and can you use active trader with options? And you cant detach the chart screen on a separate screen right?
I just can’t wrap my head around risking many thousands of dollars, all to make a few hundred. I’m interested in this in theory… but in reality if I own 100 shares of stock I really like, then having to part with that is unacceptable. I research one particular ETF I really like, it would cost me $1750 for 100 shares. Then to purchase a covered call the premium was only like $65. Seriously? Going to risk $1750 all in an effort to make a measly $65. I think not. This just isn’t for me cause I’m not ok with risking losing my 100 shares for such a paltry sum
I am confused on the 575/635 spread. The spread was 60 and at one point the stock was fully in the money at 635 but you said the unrealized profit was $1755. It seems like the cost of the option of 21.45 was taken out twice to get to 17.55 (39-21.45). Maybe I missed something. I realized the option was not realized but if it was in the money at that time why wouldn't it get max profit if exercised at the time?
Hello, I am new to option debit spreads. As an example if I trade a 49/70 Bull call spread & my entry cost is $995( probable profit $1105) & the stock price is $57.47 , my question is does the profit go up $ for $ as the price moves up
Great video. keep it up!
What if you go way out the money on debit spread. Say Tesla is 450 I get a 550-570 spread.the price hits its 550. Do I gain the profit from 450 to 550 like a Regular call or am I capped until it hits 450. Basically trying to understand, since my calls are changing prices from the price I paid for them. I’m just trying to see if there’s a benefit from doing a out of the money spread like I mention. I know a regular call would probably make me rich but wondering about a spread
Thank you for this video it's really helpful to understand Bull Call spread Strategy. I have a Question: In your previous video of Call Options Explained for Beginners, you mentioned when you short (sell) a call option then if Stock price goes down then you will get profit. Then how come in bull call spread you have short call and you will be in profit if stock price goes up ? can you please explain, both seems contradictory. Appreciate your response, Thank you in advance!
Thank you very much
I just found your channel and have been binge watching your videos! You’re a really great teacher! Keep up the good work! Thanks!
Thanks so much!
Do you need a lot of capital to open a bull call spread? Lets say the stock is at 155 u buy the 155 call and sell the 160call for contract expiring next week. Lets say next week the stock is at 170 and u get an early assignment for the 160 call, what happens next? Ur forced to sell 100 shares at 160 for 16000, but now u have to buy the 100 shares at 150 at 15000 and u keep rest of the profit right. But what if you dont have enough capital to buy 100 shares at 150, what happens next. Sorry im little confused.
That was amazing 🤩 !
Thanks for the clear articulation, I didnt really understand options until this video, spreads look really really easy!
This sounds ALOT like the "poor man's covered call"... But this trade uses a shorter expiration on the Call option that you buy. Am I right?
In the first example, it looks like you're only saving yourself around $185 by opening up a spread, instead of just opening up a single call option at $49 ... why put yourself through the trouble to open this type of trade when a single call option has limitless upside potential and you only save yourself a small amount of money?
I feel like buying/selling closer ATM options would be better right? You’d have a lower break even price and could get out of the trade quicker.
An awesome video!
I like your channel and content my dude, hit you with a like and sub, what is visually killing me is you using a blurred background while showing Neon Text in your monitor, it really gives me this drunk vision feel that distracts me from listening to your content.
Hi. Nice vdo. What are the risks involved in doing a Bull call spread with In the money or Deep in the money options😎😎😎
even though you collect premium on the short call aren't you limiting the up-side potential by having to buy back the short call at a loss?....why not just buy a call only?
I have question about when to sell you spread for profit. Is it common or wise to sell the call first for profit and then hold the short call to perhaps see maximum profitability if it expires worthless? Or is it best to just sell the spread together at once? I'd guess you could do both as it totally discretionary? Thanks
Should I let my Bull call spreads expired to get the maximum gain when the stock price is above my strike prices at the expiration?
In IBKR when I tried to do a vertical call spread it said "this account may not hold positions short call" and doesn't let me buy the vertical spread :? Do I have to own the stock before I can do a vertical call spread?
Hi Chris I have at this time a 10 wide Call Bull Spread, and it reached my profit two weeks after trade was put on but I tried to close it and it kept saying short ley was still open. I adjust it for a less profit and Tasty Works would not accept closing the trade. I asked why they said something about house clearance. I didn't know what that was it since hit profit again and they still wouldn't close so now I have to wait Feb 18th or early AM Feb 19 to close .please reply thanks
💯👍 thank you so much man, great vid!
You're welcome! Thanks for the comment!
-Chris
One of the best videos I have seen so far. One quick question though, any idea as which option strategy could have the highest profit potential at its lowest loss potential?
Thank you for your clear and very informative sharing. I have learnt so much from your videos.
Right.. YOu get to buy the stock at the strike which is a lower price. Doesn't the exchange just settle the trade in cash if you're not assigned?
Do u have any tricks to remember Max loss and max profit for all bull and bear strategies?Do u have formulae in one place for all strategies?
I really enjoyed this video, your style is perfect, I like it ! Thanks a lot and good luck.
Thank you! I'm glad you enjoyed the video. I appreciate the comment and viewership!
-Chris
@projectfinance Options noob here.. how is this strategy different from placing a stop loss on the call buy ?
You are option universe guru. Salute for sharing your wealth of knowledge
If you’re bullish why not sell a put spread? If the stock doesn’t move you still collect the premium.
Great video! Any chance you could recommend a good options strategy book for advanced beginner?
Hi. Can I use debit spreads to day trade spx? I day trade spy now but like the tax breaks spx offers. Thanks
What is it called if you buy a bull call spread but with the long call at a further out expiry date than the short call? And how does that strategy work? Thx.
Great video unfortunately the background music is very distracting
Thank you :) If this is your first time watching this you might have to watch the video a couple times!
an error.... the initial set up is supposed to be $596...... not $569....look at that example
what happens if stock goes above the short leg before expiration? can you close for max profit? update: nvm, answered at 13:00
Do they always have to be in the money vs out of the money. What if they are both “in the money” just at a lower/higher strike price?
If It’s like your reading straight from the investopedia article… you don’t understand Bull Call Spreads either.
Why not you share a few of your experiences with Bull Call Spreads???
That would actually be helpful and this wouldn’t seem like your reading straight from the investopedia article
I do understand BCS. this is an old video though. Please check out my newest one for real trades and better commentary: Bull Call Spread Tutorial & Trade Examples ($30,000+ in Profits)
th-cam.com/video/GnVOPn8QjB0/w-d-xo.html
thanks bro i appreciate it. im learning alot
Really appreciate all the videos!
Thank you!
GREAT VIDEO. !!!!!!!!!!!!!!!!!!!!!!!!!
Thanks!
I subscribed to a couple paid services on a trial basis. However, this vid allowed me to comprehend buying a call spread perfectly, since it outlined three different strike selection strategies in the same video. My paid services, although claiming to be geared toward beginners, always got to a point that it was talking over my current knowledge. Interesting that, sometimes, free is better than paid. Thanks for this vid.
I'm glad you found these vids!
Such a best video since i watching videos of options. Thank you so much boss.
Spreads should just automatically sell themselves once they hit strikes prices then
How do you know how far the strike price should be to purchase and sell an option.
What is the difference between a BULL CALL spread and a BULL PUT spread? Please!
A bull call spread is when you buy a call spread. A bull put spread is when you sell a put spread.
The positions are actually the exact same thing IF you use the same strike prices.
For example, buying the 100/105 call spread (buy the 100 call, sell the 105 call) is the exact same position as selling the 100/105 put spread (sell the 105 put, buy the 100 put), assuming we're looking at options on the same stock and expiration cycle.
It's more so a matter of preference/situation. Sometimes you'll want to buy a call spread to get bullish exposure to the stock price, and other times you may want to sell a put spread.
Many people find themselves preferring to sell spreads, in which case they'll mostly trade the bear call spread and bull put spread (both are credit spread strategies -- you collect a premium when entering the position).
Other traders prefer to buy spreads, in which case they'll lean towards the bull call spread and bear put spread (both are debit spread strategies -- you pay to enter the position).
As mentioned, the spreads can be used interchangeably, but it's typically a matter of preference and/or the situation you're in.
I know this may be very confusing, but stick with it and it'll begin to make more sense over time!
Let me know if you have any follow-up questions. I could do an entire video explaining the differences between the two! At the core, they are the same, just two different ways to set up the trade.
-Chris
Anyone in DFW that can show me this in person? I get the gist but just need a little one on one help.
buying shares have no expiration tho compare to bull call spread
So do u sell the option right after u buy it, won't u still need the $in ur account?
Hi im very new to options. I dont know if you heard of a 20 years old guy who commit suicide because of losing from option trading. There's a screenshot of his Robinhood account that his portfolio is (negative) -730k. My question is it possible to get negative or it will just expired/lost value if the call price went down to zero? Thank you
I did hear the tragic story. It is especially tragic because he did not lose $730k. His account was marked -$730K because he was assigned on short puts and the value of the shares was $730,000, but he still had the long put in his put spread, which means his risk was limited to the long put's strike. I believe the maximum loss on his spreads were a few hundred dollars, but he was assigned on the short puts and the long puts had not settled yet. So he temporarily had a few hundred shares of AMZN while still owning the put as part of his spread. When the put is exercised (which happens automatically at expiration if it is in-the-money, which I believe it was in this case), the shares are sold at the long put's strike. The loss is the difference between the strikes, and the premium received for selling the spread in the first place. The loss described here is the same as the maximum spread loss when selling it.
Do you need a lot of capital to open a bull call spread? Lets say the stock is at 155 u buy the 155 call and sell the 160put for contract expiring next week. Lets say next week the stock is at 170 and u get an early assignment for the 160 put, what happens next? Ur forced to sell 100 shares at 160 for 16000, but now u have to buy the 100 shares at 150 at 15000 and u keep rest of the profit right. But what if you dont have enough capital to buy 100 shares at 150, what happens next. Sorry im little confused. Ty for all u do.
Do you need a lot of capital to open a bull call spread? Lets say the stock is at 155 u buy the 155 call and sell the 160call for contract expiring next week. Lets say next week the stock is at 170 and u get an early assignment for the 160 put, what happens next? Ur forced to sell 100 shares at 160 for 16000, but now u have to buy the 100 shares at 150 at 15000 and u keep rest of the profit right. But what if you dont have enough capital to buy 100 shares at 150, what happens next. Sorry im little confused.
I think I’m missing something... If the stock price at entry is $150, wouldn’t you want to buy the option with the higher strike price, and sell the option with the lower strike price? In the video it’s the other way around and I’m confused :(
I think of it like buying a car. If I buy a car for $12k I'd prefer to resell it at a higher price like $14k
The way this dude just stares at the camera in all his vids and reads out all dates, full numbers with decimals and shit it's like I'm watching an AI person. It's so uncanny. I appreciate the videos immensly though. Kudos on that!
Yeah I was bad. New videos are much better
Great presentation!! Very useful Q and A.
Hi can I ask do we need to own the 100 share first? Or we can use this for naked trade?
Great video! When my spread is at expiration ,and the stock is above the break even point do I have to do anything else to get my profits?
Thanks! You can take profits at any time before expiration. You don't have to wait til expiration. If you buy a call spread and the stock price increases, you can sell the call spread at its now higher price and realize your profit. It's just like buying stocks in that you can enter and exit whenever you want. You can buy a call and sell it 30 seconds later if you want. The expiration doesn't lock you in.
but, doesn't doing a spread that has both the Buy & Sell ITM put you at a higher risk of being exercised on?
It's highly unlikely you'll get assigned on a short ITM option unless it has close to no extrinsic value, which means the spread has almost no time to expiration, or the spread is extremely deep ITM before expiration.