7/31/2019 Vertical Bull Spread and Vertical Bear Spread

1/7

Vertical Bull Spread and

Vertical Bear Spread

7/31/2019 Vertical Bull Spread and Vertical Bear Spread

2/7

Vertical Bull Spread (Calls)

Consider the following information:

Netflix (Aug. 12th

) $246

Netflix $240 Sept. Call $19.25Netflix $250 Sept. Call $13.75

Buy 1 Netflix $240 and Write 1 Netflix $250Initial Cash Flow -100*19.25 + 100*13.75

-$1925 + $1375 = -$550

7/31/2019 Vertical Bull Spread and Vertical Bear Spread

3/7

At Expiration (3rd

Friday in September)

Stock

Price

$240 Call

Option

$250 Call

Option Net Profit

$220 $0 $0 -$550$240 $0 $0 -$550

$245.50 $550 $0 $0

$250 $1000 $0 $450$270 $3000 $2000 $450

7/31/2019 Vertical Bull Spread and Vertical Bear Spread

4/7

Vertical Bear Spread (Calls)

Consider the following information:

Netflix (Aug. 12th

) $246

Netflix $240 Sept. Call $19.25Netflix $250 Sept. Call $13.75

Buy 1 Netflix $250 and Write 1 Netflix $240Initial Cash Flow -100*13.75 + 100*19.25

-$1375 + $1925 = $550

7/31/2019 Vertical Bull Spread and Vertical Bear Spread

5/7

At Expiration (3rd

Friday in September)

Stock

Price

$250 Call

Option

$240 Call

Option Net Profit

$220 $0 $0 $550$240 $0 $0 $550

$245.50 $0 $550 $0

$250 $0 $1000 -$450$270 $2000 $3000 -$450

7/31/2019 Vertical Bull Spread and Vertical Bear Spread

6/7

Vertical Bull Spread (Puts)

Consider the following information:

Deere (Aug. 12th

) $75.10

Deere $77.50 Sept. Put $5.40Netflix $72.50 Sept. Put $3.15

Buy 1 Deere $72.50 and Write 1 Deere $77.50Initial Cash Flow -100*3.15 + 100*5.40

-$315 + $540 = $225

7/31/2019 Vertical Bull Spread and Vertical Bear Spread

7/7

At Expiration (3rd

Friday in September)

Stock

Price

$72.50 Put

Option

$77.50 Put

Option Net Profit

$70 $250 $750 -$275$72.50 $0 $500 -$275

$75.25 $0 $225 $0

$77.50 $0 $0 $225$80 $0 $0 $225