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+192 Part II: Call Option Strategies 
+The spread between the April 50 and the July 50 has now widened to 5 points. Since 
+the spread cost 3 points originally, this widening effect has produced a 2-point prof­
+it. The spread could be closed at this time in order to realize the profit, or the spread­
+er may decide to continue to hold the July 50 call that he is long. By continuing to 
+hold the July 50 call, he is risking the profits that have accrued to date, but he could 
+profit handsomely if the underlying stock rises in price over the next 3 months, 
+before July expiration. 
+It is not necessary for the underlying stock to be exactly at the striking price of 
+the options at near-term expiration for a profit to result. In fact, some profit can be 
+made in a range that extends both below and above the striking price. The risk in this 
+type of position is that the stock will drop a great deal or rise a great deal, in which 
+case the spread between the two options will shrink and the spreader will lose money. 
+Since the spread between two calls at the same strike cannot shrink to less than zero, 
+however, the risk is limited to the amount of the original debit spent to establish the 
+spread, plus commissions. 
+THE NEUTRAL CALENDAR SPREAD 
+As mentioned earlier, the calendar spreader can either have a neutral outlook on the 
+stock or he can construct the spread for an aggressively bullish outlook. The neutral 
+outlook is described first. The calendar spread that is established when the underly­
+ing stock is at or near the striking price of the options used is a neutral spread. The 
+strategist is interested in selling time and not in predicting the direction of the under­
+lying stock. If the stock is relatively unchanged when the near-term option expires, 
+the neutral spread will make a profit. In a neutral spread, one should initially have 
+the intent of closing the spread by the time the near-tenn option expires. 
+Let us again tum to our example calendar spread described earlier in order to 
+more accurately demonstrate the potential risks and rewards from that spread when 
+the near-term, April, call expires. To do this, it is necessary to estimate the price of the 
+July 50 call at that time. Notice that, with XYZ at 50 at expiration, the results agree 
+with the less detailed example presented earlier. The graph shown in Figure 9-1 is the 
+"total profit" from Table 9-1. The graph is a curved rather than straight line, since the 
+July 50 call still has time premium. There is a slightly bullish bias to this graph: The 
+profit range extends slightly farther above the striking price than it does below the 
+striking price. This is due to the fact that the spread is a call spread. If puts had been 
+used, the profit range would have a bearish bias. The total width of the profit range is 
+a function of the volatility of the underlying stock, since that will determine the price