Bull put vs bull call. Bull Put Spread Vs. Bull Call Spread. by Eric Bank. Bull spreads have tightly defined maximum profits and losses. Sometimes you like a stock but don't love it. Bull spreads were made for this situation. They use options to profit from a higher or steady stock price but are hedged — by way of spreads with offsetting positions.

Bull put vs bull call

Option Trading Bull Put Spreads and Bull Call Spreads

Bull put vs bull call. One of the most interesting and challenging parts of options spreads, is the ability to put together positions that utilize completely different options to achieve the same or similar objective. One excellent example is the vertical bull call spread, which is a debit spread, and the vertical bull put spread, which is a debit spread;.

Bull put vs bull call


Bull put and bull call spreads are options strategies that are designed to take advantage from a rise in the price of a specific stock. An option gives the holder the right, but not the obligation, to buy or sell a specific quantity of a particular stock at a predetermined price and date. A call option provides the right to buy the stock, while a put option gives the holder the right to sell.

When you structure a bull call spread you buy a call with a lower strike price and sell a call with a higher strike price, expiring on the same date. This is your maximum loss. With both strategies, the maximum gain as well as loss is limited.

Therefore, these strategies represent a smaller risk than simply purchasing the underlying stock. However, there are also key differences: You must put up net cash to initiate the bull call spread, whereas you will have to put up no money upfront, but will end up with net cash when you structure a bull put spread.

Hence, the bull put is a better choice if you are facing a cash shortage. Furthermore, the call spread usually has a higher maximum profit and lower maximum loss than the put spread with the same two strike prices.

However, the put spread will have a lower break-even point, and will register a profit with less of a gain in the underlying stock's price. Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank.

Options help traders capitalize on price movements in stocks. Option Basics An option gives the holder the right, but not the obligation, to buy or sell a specific quantity of a particular stock at a predetermined price and date. Bull Call Spread When you structure a bull call spread you buy a call with a lower strike price and sell a call with a higher strike price, expiring on the same date.

Key Differences With both strategies, the maximum gain as well as loss is limited. References Options for Rookies: Bull Call Spread vs. Bull Put Spread by ChartSpeak. More Articles You'll Love. How to Trade Leveraged Stock Options. What Happens at the Expiration of a Vertical Spread? Taxation of Covered Calls. Expected Return of a Call Option.

Stock Options Explained in Plain English.


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