The following example uses actual market prices on November 7, 2016.
You currently do not have any position in the stock market. The current SPY (S&P 500) share price is $213. Suppose that SPY does not pay dividends and the riskless interest rate is zero.
There exists a one-month European call option on 100 shares of SPY with an exercise price of $213 (per share) and a premium of $2.80 (per share). There also exists a one-month European call option on 100 shares of SPY with an exercise price of $218 (per share) and a premium of $1.20 (per share). You expect that expect that the SPY share price will rise in the next month, but probably not much higher than $218.
 

a) Strategy A: You wish to buy one call option with an exercise price of $213, but do not want to pay a premium of $2.80 (per share). You, therefore, buy one call option with an exercise price of $213 and also write one call option with the exercise price of $218. Calculate the initial cash flow, the break-even stock price at expiration and your maximum profit and losses.
b) Strategy B: You buy ONLY one call option with an exercise price of $213. (That is, you do not have any position in the other call option.) When (at what price) will Strategy A and Strategy B have the same profits (or losses) on expiration day? When (at what price range) will Strategy A have a higher profit (or a smaller loss) on expiration day? When (at what price range) will Strategy B have a higher profit (or a smaller loss) on expiration day?