How can I use the call spread in an option trading?

Question

I just learn option trading and I don't know how to use the call spread. Any ideas? Thanks.

Answer 1

First you need to understand there are many different types of call spreads. The simplest is probably a bullish vertical call spread. Here are two examples of one:

http://www.cboe.com/Strategies/WeeklyStrategy.aspx?DIR=LCWeeklyStrat&FILE=Oct0207strategy.doc&CreateDate=02.10.2007

http://www.cboe.com/Strategies/WeeklyStrategy.aspx?DIR=LCWeeklyStrat&FILE=Sept2507strategy.doc&CreateDate=25.09.2007

The next simplest is probably a Short Out-of-the-Money Vertical Call Spread. Here is an example of one:

http://www.cboe.com/Strategies/WeeklyStrategy.aspx?DIR=LCWeeklyStrat&FILE=Sept1807strategy.doc&CreateDate=18.09.2007

There are any number of other call spreads possible, including calander spreads, butterflies, condors, christmas trees, ratio spreads, backspreads, diagonal spreads, etc. The best way to learn about them, IMHO, is to read a good book about options.

Answer 2

only sell a decision to open. ok you're credited with the proceeds yet there's a brilliant possibility of dropping. in fact the loss is probably open ended. you're giving the shopper the incredible to call the shares off you on the strike. enable's say there's a takeover bid. The shares ought to go as much as something: 2x, 3x,4x. while you're short, as you would be you're able to be able to desire to purchase the shares contained available to cover. Or close the alternative. maximum uk brokers won't help you write bare calls besides. You do point out unfold, even nonetheless. So this might conceal to 3 degree. do no longer do it except you're one hundred% sparkling on achievable outcomes.