16 lines
941 B
Plaintext
16 lines
941 B
Plaintext
Bear Call Spread
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The next type of vertical spread is called a bear call spread . A bear call
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spread is a short call combined with a long call that has a higher strike
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price. Both calls are on the same underlying and share the same expiration
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month. In this case, the call being sold is the option of higher value. This
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call spread results in a net credit when the trade is put on and, therefore, is
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called a credit spread.
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The bull call spread and the bear call spread are two sides of the same
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coin. The difference is that with the bull call spread, one is buying the call
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spread, and with the bear call spread, one is selling the call spread. An
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example of a bear call spread can be shown using the same trade used
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earlier.
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Here we are selling one AAPL February (40-day) 395 call at 14.60 and
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buying the 405 call at 10.20. We are selling the 395–405 call at $4.40 per
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share, or $440.
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Exhibit 9.4 is an at-expiration diagram of the trade. |