When Considering A Bull Call Spread

For many investors a good way to profit on a bullish move is by investing in a bull call spread. Using this kind of strategy is not difficult at all and is unfortunately thought of as difficult. Investors employing the power of options strategies such as this can have a set level of risk on the trade.

Good option traders will generally take a certain market outlook or forecast and adjust their trades accordingly. This is also known as or called a vertical strategy and is perfect for anyone that is bullish or very bullish on the future direction of the security.

Vertical spreads require that you buy an option with a lower strike price. The next step is to sell or write an option for a higher strike price. It is important to note that this has to be done on options with the same expiration month. The lower strike priced options will generally usually be in or at the money while the higher strike priced options are out of the money.

Vertical spreads are viewed as a hedged investment. The money spent buying one option will be partially offset or to a certain extent refunded by the premium received of the writing of an option. The hedging benefits can be seen if say the written option is called you can always exercise your purchased option to deliver the shares. Remember to buy and sell equal number of options to fully cover yourself.

All options brokers will be able to easily handle this kind of transaction. Depending on the broker you choose you may be able to carry out this kind of trade using their online software. In case you can’t, you will only need to contact them by telephone. Commissions are charged once and not twice as this is considered one trade.

In order to make money your profit from this kind of trade will occur when the prices for the underlying security rises above the highest strike priced option. Before entering this kind of trade it is wise to know your BEP level. The BEP is your breakeven point.

The Bull call spread is a great way for anyone that is either moderately or very bullish to make a profit using options. This trading strategy can be easily handled by any options broker and will not be counted as two commissions. Remember to figure out your breakeven point as well as your profit and loss scenarios before entering this kind of strategy.

Sweet Dreams Trading Company will help you to understand the bull call spread strategy as well as how to use them. Contact them today for more information! (http://www.sweetdreamstradingcompany.com)

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