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Bull spread


This strategy can be implemented using either call options or put options.

Using calls, the strategy is a long position in a call with strike price X1 combined with a short position in a call with strike price X2, where X1 is less than X2. Both options have the same expiration date. A bull spread created from calls requires an initial investment.

Using puts, the strategy is a long position in a put with strike price X1 combined with a short position in a put with strike price X2, where X1 is less than X2. A bull spread created with puts involves a positive cash flow to the up front and payoff that is either negative or zero.

Upside potential and downside risk are both limited.


Steven Huddart
Smeal College of Business, Penn State University, University Park, PA 16802-3603 USA
(814) 863-0048
huddart@psu.edu
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http://personal.psu.edu/sjh11/OptionGlossary/BullSpread.shtml
was last updated on Tue, Aug 21, 2018.
Today is Wed, Sep 18, 2019.

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