Bear call spread

 

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Bear call spread

The purchase of a call with a high strike price against the sale of a call with a lower strike price.The maximum profit is the net premium received (premium received - premium paid), while the maximum loss is calculated by subtracting the net premium received from the difference between the high strike price and the low strike price (high strike price - low strike price net premium received). A bear call spread should be entered when lower prices are expected.



Similar Matches

Horizontal spread

Horizontal spread

The simultaneous purchase and sale of two options that differ only in their expiration dates.


Spread betting

Spread betting

A form of investing which is more akin to betting, and can be applied either to sporting events or to the financial markets. At its core is the maxim 'the more right you are, the more you win'.In the simplest terms, a spread betting firm quotes two figures for, say, the position of the FTSE 100 index at close of trading on a certain day. Its 'spread' is 6005 - 6011.If you think that the FTSE is going to end up higher on the day than 6011, you might buy (go high) at 6011 and choose a stake per point of 5.00 (the 'tick value')If you think that the FTSE is going to end up lower on the day than 6005, you might sell (go low) at 6005 and choose a stake per point of 5.00.If the FTSE actually closes at 6034, and you were a buyer at 6011 you were right by a margin of 23 points, and therefore win 115 which is 23 times your stake. If, however, you were a seller at 6005, you were wrong by 29 points and would lose 145.Spread betting is risky, therefore, because the movement of the underlying index (or share, or football score . . ) can mean you lose a high multiple of your stake. What makes it exciting is that the spreads offered by firms like IG Index, Financial Spreads, City Index and Cantor Index move all the time during the course of the trading day (or during a football match) so:If you are wrong half way through the day you may be able to recover your position by placing another betIf you are right halfway through the day you can lock in your gains by placing another hedge bet.The other feature of spread betting is that there are no brokerage costs, commissions or charges to pay, and gains are tax free. But it is risky!


TED spread

TED spread

Difference between US Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality.


Butterfly spread

Butterfly spread

Applies to derivative products. Complex option strategy that involves selling two calls and buying two calls on the same or different markets, with several maturity dates. One of the options has a higher exercise price and the other has a lower exercise price than the other two options. The payoff diagram resembles the shape of a butterfly.


Credit spread

Credit spread

Applies to derivative products. Difference in the value of two options, when the value of the one sold exceeds the value of the one bought. One sells a "credit spread." Antithesis of a debit spread Related: Quality spread.


Further Suggestions

Vertical spread
Delta Spread
Maturity spread
Interdelivery spread
backspread
Ratio Calendar Spread
Box spread
NOB spread
Yield spread strategies
box spread
Intercommodity spread
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Spread
bid/offer spread
Diagonal spread
calendar spread
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bear put spread
crack spread
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Time spread strategy
Put ratio backspread
bear spread
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