Question
From Investopedia: In a bull call spread strategy, an investor simultaneously buys calls at a specific strike price while also selling the same number of
From Investopedia: In a bull call spread strategy, an investor simultaneously buys calls at a specific strike price while also selling the same number of calls at a higher strike price. Both call options will have the same expiration date and underlying asset. This type of vertical spread strategy is often used when an investor is bullish on the underlying asset and expects a moderate rise in the price of the asset. Using this strategy, the investor is able to limit their upside on the trade while also reducing the net premium spent (compared to buying a naked call option outright).
You have purchased 50 call options on IBM at a strike price of 150, while also selling 50 call options on IBM at a strike price of 170 (same maturity date).
On maturity date the price of IBM is $163.0. What is your net payoff on maturity date? Only maturity date payoffs, you do not have to consider the money you received and paid in setting up the bull call spread.
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