Chapter 7: Bull Spreads 173 
Moreover, there is a break-even point that always lies between the two striking prices 
at expiration. In this example, the break-even point is 32. All bull spreads have prof­
it graphs with the same shape as the one shown in Figure 7-1 when the expiration 
dates are the same for both calls. 
The investor who establishes this position is bullish on the underlying stock, but 
is generally looking for a way to hedge himself. If he were rampantly bullish, he 
TABLE 7-1. 
Results at expiration of bull spread. 
XYZ Price of 
Expiration 
25 
30 
32 
35 
40 
45 
FIGURE 7-1. 
Bull spread. 
c: +$300 
.Q 
~ 
-~ 
w 
October 30 
Profit 
-$ 300 
- 300 
100 
+ 200 
+ 700 
+ 1,200 
October 35 
Profit 
+$100 
+ 100 
+ 100 
+ 100 
- 400 
- 900 
,, 
,,,' 
;ff 
,,,' 
,,' 
iii 
~ 
,,,,' 
$01---------'----J...__.... _ ___. _____ _ 
30 3:?,,' 35 
0 ::: -$200 
e 0..-$300 
, , 
..------,,,,,' 
Call Purchase 
•-----------,' 
Stock Price at Expiration 
Total 
Profit 
-$200 
- 200 
0 
+ 300 
+ 300 
+ 300