Hope everyone is having a good weekend.
I have a fair amount of successful experience with selling put credit spreads but am looking to test/learn other vertical spreads to expand my ability to flow with market conditions – specifically getting started with bull call spreads.
I am willing to trade off max return potential for higher likelihood of winning the trade.
So here is a potential set up for feedback – using 10 contracts for the spread and using optionsprofitcalculator.com for the trade details below;
Buy 10 calls @ 200 = $27.07
Sell 10 calls @ 205 = $22.5 (edited to correct pricing)
Entry cost: $4,580.00 see details
Maximum risk: $4,580.00 (at AAPL$200.00)
Maximum return: $420.00 (at AAPL$205.00)
Max return on risk: 9.17% (558% ann.)
Yes – anything could happen and know that capital is at risk and there is an upfront debt but thinking that with the trade being profitable (assuming I can get filled at these prices which is a big if) even with a 3 std deviation move it should be a pretty cautious set up, yes?
For our more experienced/advanced traders here any cautionary tails or details and considerations I'm missing? Have at it – rip it apart by all means. Thanks!
ITM bull call spread (vertical) – any lessons learned that people can share?
byu/OkAnt7573 inoptions
Posted by OkAnt7573
6 Comments
Bull call spread short is done otm, elsewhere you are assuming risk of early assignment
Maybe I am mis understanding this,
You are buying the calls spread for 5.02?
Buying the 200 calls for 27.07
Selling the 205 calls for 22.05
That would be a max risk of 5,020 with no chance of profit for 10 spreads.
Are these the prices?
Unless you are very familiar and comfortable with the decision process around early exercise/assignment, I would suggest just sticking to OTM spreads. Just do the 200/205 put spread instead.
What are the expiration dates of the contracts? Also, AAPL is trading near its ATH and you’re entering a bullish position?
I do this sometimes too if it looks like a low volatility week or day on 0dtes on spx
Why so deep ITM? I’m curious. I tend to open ITM/ATM longs on my debit spreads with the short leg some distance out, depending on the DTE and Greek balance, and close the spread as the underlying approaches my short leg strike. I’ve never quite understood opening deep ITM positions