The Bull Call Spread strategy is the counterpart of the bear call spread strategy. If investors have an underlying, whose price is likely to increase and limit the risk, they use the Bull Call Spread strategy. This strategy is often used by advanced and professional investors, as IQ Option a lot of attention is needed here.
How the strategy works
In the Bull Call Spread strategy, investors first buy a call with a low base price. At the same time a call with a higher basic price is sold. Both have the same runtime. If the investor expects a further increase in the price without major price increases, he will use the Bull Call etoro Spread strategy.
An investor buys a call for EUR 100 as well as an option premium of EUR 10. At the same time he sells a call for 120 EUR with an option premium of 5 EUR. Compared to a long call, the investor can Copy Trading get a slightly higher profit with the EUR 100. On the other hand, profit margins are lower at EUR 120. The loss risk is reduced by the bull call spread, but at the same time the chance of winning.
In order to implement the strategy successfully, it is necessary that the plus500 options be linked to one another in order to benefit from the increase in the price. First, a loss arises because a higher premium for warrants with a low exercise price is due. This loss can, however, be converted into a profit if the price develops as desired and the option is executed. If the price of the Underlyings exceeds the price of both options, a profit can be realized. The break-even point indicates when the profit zone is reached. However, this must be determined individually for each option.
Graph: Bull Call Spread (Strategy):
The Bull Call Spread can be aggressive or behavioral, optimistic. Here it is important which behavior the investor prefers.
- Aggressive approach: The exercise price of the option is other my latest blog post chosen so that both options are out of the money at the time of Social Trading spreading. This means that the exercise price of the two options is above the current price of the Underlying, and because the out-of-the-money options are generally more favorable, the investor needs to invest little capital for the Bull Call Spread. It should be noted, however, that the break-even point is relatively high, which makes it difficult to reach the profit threshold.
- Behavior: This is where options are selected that are in the money, making the profit threshold 24option faster. However, only a low maximum gain will be achieved here. In addition, high premium expenses are incurred. However, the risk is limited.
The Bull Call Spread strategy can be customized, with the following options for investors:
In the first case, the investor is very aggressive, while he is careful with the other two options and incorporates a safety buffer.
Advantages and disadvantages of strategy
Investors can choose the bull call spread anyoption with a calculated risk. However, it is necessary to determine the break-even point because a loss occurs by setting the spread. In general, however, the risk of loss is limited. In addition, investors have more options to deal with possible losses