You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes:

Wildwood Corp	Underlying Stock Price: $50.00
Expiration	Strike	Call	Put
June	45.00	8.50	2.00
June	50.00	4.50	3.00
June	55.00	2.00	7.50

a. How would you establish a bull money spread with calls?

Sell the 55 call and buy the 45 spread

b. What would be the cost to establish the bull money spread with calls?

(8.50-2.00)*100 = $650

c. If in June the stock price is $53, what would be your net profit on the bull money spread?.

At expiration the value of the $45 call would be $8 per share ($800 per contract) and the value of the $55 call would be $0, making the value of the spread $800 - 0 = $800.

The net profit would then be $800 - $650 = $150

d. How would you establish a bull money spread with puts?

e. Suppose you establish a bullish money spread with the puts. In June the stock