A long call spread gives you the right to buy stock at strike price A and obligates you to sell the stock at strike price B if assigned. This strategy is an alternative to buying a long call. Selling a cheaper call with higher-strike B helps to offset the cost of the call you buy at strike A. That ultimately limits your risk. You may wish to consider buying a shorter-term long call spread, e.

Buying Call Options - The Risks & The Rewards

Potential profit is limited to the difference between strike A and strike B minus the net debit paid. For this strategy, the net effect of time decay is somewhat neutral. After the strategy is established, the effect of implied volatility depends on where the stock is relative to your strike prices.

If your forecast was correct and the stock price is approaching or above strike B, you want implied volatility to decrease.

If your forecast was incorrect and the stock price is approaching or below strike A, you want implied volatility to increase for two reasons. First, it will increase the value of the option you bought faster than the out-of-the-money option you sold, thereby increasing the overall value of the spread. Second, it reflects an increased probability of a price swing which will hopefully be to the upside. Options involve risk and are not suitable for all investors. For more information, please review the Characteristics and Risks of Standardized Options brochure before you begin trading options.

Bullish Trading Strategies | The Options & Futures Guide

Options investors may lose the entire amount of their investment in a relatively short period of time. Multiple leg options pac fair anzac day trading hours involve additional risksand may result in complex tax treatments.

Please consult a tax professional prior to implementing these strategies.

Implied volatility represents the consensus of the marketplace as to the muhurat trading day 2015 level of stock price volatility or the probability of reaching a specific price point. The Greeks represent the consensus of the marketplace as to how the option will react to changes in certain variables associated with the pricing of an option functions of bombay stock exchange ppt. There is no guarantee that the forecasts of implied volatility or the Greeks will be correct.

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The Options Playbook Featuring 40 options strategies for bulls, bears, rookies, all-stars and everyone in between. The Strategy A long call spread gives you the right to buy stock at strike price A and obligates you to sell the stock at strike price B if assigned. The Setup Buy a call, strike price A Sell a call, strike price B Generally, the stock will be at or above strike A and below strike B NOTE: Both options have the same expiration month.

Maximum Potential Profit Potential profit is limited to the difference between strike A and strike B minus the net debit paid. Maximum Potential Loss Risk is limited to the net debit paid. TradeKing Margin Requirement After the trade is paid for, no additional margin is required. As Time Goes By For this strategy, the net effect of time decay is somewhat neutral. Implied Volatility After the strategy is established, the effect of implied volatility depends on where the stock is relative to your strike prices.

Use the Technical Analysis Tool to look for bullish indicators. Today's Trader Network All-Star Trade Report. TradeKing All-Star Webinar Series and Live Events. Break-even at Expiration Strike A plus net debit paid. Videos, webinars and more Stock trading videos TradeKing All-Star Webinar Series and Live Events Trader Network Forum.