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training_data/curated/text/21e294afb33e4665290807d8be1a9f0df510c510336204504a72b2d53a17d6f0.txt

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+interest and dividends remain constant. Ultimately, the maximum loss will
+be 0.80, the premium paid, if there is no time value or carry considerations.
+The maximum profit is gained if Bed Bath & Beyond is at $57.50 at
+expiration. At this price, the February 57.50 call is worth the most it can be
+worth without having the January 57.50 call assigned and creating negative
+deltas to the upside. But how much precisely is the maximum profit?
+Richard would have to know what the February 57.50 call would be worth
+with Bed Bath & Beyond stock trading at $57.50 at February expiration
+before he can know the maximum profit potential. Although Richard can’t
+know for sure at what price the calls will be trading, he can use a pricing
+model to estimate the call’s value. Exhibit 11.2 shows analytics at January
+expiration.
+EXHIBIT 11.2 Bed Bath & Beyond January–February 57.50 call calendar
+greeks at January expiration.
+With an unchanged implied volatility of 23 percent, an interest rate of two
+percent, and no dividend payable before February expiration, the February
+57.50 calls would be valued at 1.53 at January expiration. In this best-case
+scenario, therefore, the spread would go from 0.80, where Richard
+purchased it, to 1.53, for a gain of 91 percent. At January expiration, with
+Bed Bath & Beyond at $57.50, the January call would expire; thus, the
+spread is composed of just the February 57.50 call.
+Let’s now go back in time and see how Richard figured this trade. Exhibit
+11.3 shows the position when the trade is established.