Will Black 0 Report post Posted November 19, 2021 All, I understand the basic concepts of a vertical spread but need one clarification. In regards to a bullish spread the max value is the distance between the purchase call option and the sell call option. For example, if we have a strike price at $100 and we buy a call option at say $97.00 and sell a call option at $102 we have a maximum profit of $5.00 or (($5.00 * 100)-minus the cost of the buy option). What happens if the price rises above the sell price of $102.00? What does it do to the value of the trade? Share this post Link to post Share on other sites
Yowster 9,180 Report post Posted November 19, 2021 27 minutes ago, Will Black said: All, I understand the basic concepts of a vertical spread but need one clarification. In regards to a bullish spread the max value is the distance between the purchase call option and the sell call option. For example, if we have a strike price at $100 and we buy a call option at say $97.00 and sell a call option at $102 we have a maximum profit of $5.00 or (($5.00 * 100)-minus the cost of the buy option). What happens if the price rises above the sell price of $102.00? What does it do to the value of the trade? The farther above 102 you go the closer the spread value gets to the spread width. It also depends on how close you are to expiration - the closer to expiration the quicker the value approaches the spread width. Share this post Link to post Share on other sites
Will Black 0 Report post Posted November 19, 2021 1 hour ago, Yowster said: The farther above 102 you go the closer the spread value gets to the spread width. It also depends on how close you are to expiration - the closer to expiration the quicker the value approaches the spread width. 1 hour ago, Yowster said: The farther above 102 you go the closer the spread value gets to the spread width. It also depends on how close you are to expiration - the closer to expiration the quicker the value approaches the spread width. ok I'm not sure I follow the last response but what happens to the value of the spread as it gets to closer to the spread width or above $102? At the $102 range it's at it max profit value. Share this post Link to post Share on other sites
Kim 7,943 Report post Posted November 19, 2021 It gets close to $5. Share this post Link to post Share on other sites
Yowster 9,180 Report post Posted November 19, 2021 With a stock price of 102 that 97/102 vertical may be worth 4.75 a day before expiration, 4.00 a week before and 3.00 a month before Share this post Link to post Share on other sites
