How do you find the maximum profit on a bull call spread?

The max profit for a bull call spread is as follows: Bull Call Spread Max Profit = Difference between call option strike price sold and call option strike price purchased – Premium Paid for a bull call spread.

When should you close a bull call spread?

Although some traders try to achieve maximum profit through assignment and exercise, if your profit target has been reached it may be best to close the bull call spread prior to expiration. Example 2: The underlying stock, XYZ, drops below the $35 strike price before or near the expiration date.

How do you find the maximum profit from a call debit spread?

The maximum risk during bull call spreads is the net debit (difference in premiums). The maximum profit is realized if the stock is anywhere above the higher strike price. Maximum profit is equal to the difference in the strike prices minus the net debit.

How do you profit from a call spread?

The profit is the difference between the lower strike price and upper strike price minus, of course, the net cost or premium paid at the onset. With a bull call spread, the losses are limited reducing the risk involved since the investor can only lose the net cost to create the spread.

Is bull call spread a good strategy?

Spread strategy such as the ‘Bull Call Spread’ is best implemented when your outlook on the stock/index is ‘moderate’ and not really ‘aggressive’. For example the outlook on a particular stock could be ‘moderately bullish’ or ‘moderately bearish’.

Should you let debit spreads expire?

But the fact is that every debit spreads doesn’t expire worthless due to theta decay. In fact, because there are so many different options expirations on so many different assets, you can place a call debit spread with several months to go until expiration and theta decay will have less of an impact on the trade.

What happens if a debit spread expires in-the-money?

Spreads that expire in-the-money (ITM) will automatically exercise. Assuming your spread expires ITM completely, your short leg will be assigned, and your long leg will be exercised.

When should I sell my spreads?

The pace of time decay accelerates closer to expiration, so it often makes sense to sell put spreads with no more than 2-3 weeks until expiration.