What is a Bull Call Spread?How can a Bull Call Spread help you in the stock market? Let us show you, we did our research and found a stock bouncing off of support. Great, now what are we going to do with it? We could buy it, but what if it doesn't go up? One strategy would be the Bull Call Spread. Using this technique we can make money even when the stock stays at the same price or goes down a little bit. How can we do this you ask? Well, let's think about what calls are for a second. A call gives you the right to buy a stock at a certain strike price. A Bull Call Spread is simply buying a call option on a bullish stock and selling a call option on a bullish stock. There are many different strike prices for optional stocks. What if we use the example below? Let's sell a $65 call for $7 and buy a $60 call for $12. You must be thinking I'm out of my mind 7-12= -4. Why would anyone do that? The answer is really quite simple.....
What would happen if the stock cashed out above $65 by expiration? We would get called out and forced to sell a stock we don't own at $65. Normally to sell it to we have to first buy it. Don't we have the right to buy it at $60? Wow we just made $5. We did pay $4 originally so we only made $1. But that was a 20% return. Let us see what would happen if we could be right with this trade 90% of the time. Show You The Money: ($1)*(.9)-($4)*(.1)=$.5 This spread typically will return higher rates than Bull Put Spreads, it does lack the safety net if you are wrong. We recommend paper trading any spreads before trading with real money to perfect you're strategy. You may learn to love the Bull Call Spread and use it frequently. Good luck and Happy Trading!
 
Search Engine Optimization
|
