Long Call Spread (Strategies Overview)

• Strategy: Buy call options contract + Sell higher strike call options contract (ratio of 1 to 1) on the same stock

• Number of legs: 2

• Market Prognosis = Bullish (Up-Market)

• Implied Volatility = very minimal and considered irrelevant

• Expiration Month = 60 days or more to expire (beginners).  Flexible for veterans

• Max Loss = Risk = Limited to premium paid for spread = Premium paid for long leg – premium received for short leg
• Max Profit = Distance between two legs – premium paid for spread

• Upside Breakeven Point = strike price at the time of purchase of the long leg + premium paid per 1 option spread

• Downside Breakeven Point = None

• Margin = None

• Advantage over Long Stock = Significantly Lower Cost + Limited Risk

• Advantage over Long Straight Call = Lower Cost + Shorter path to breakeven

• Disadvantage over Long Stock = Limited time to be right

Tags: bullish, debit, future, long cal spread, option, spreads, stock

Category: Vertical Spreads