Question

Select between a Bull Call Spread or Bear Call Spread strategy based on your 1 year...

Select between a Bull Call Spread or Bear Call Spread strategy based on your 1 year price target. Calculate the expected outcome in 1 year assuming the stock attains your 1 year price target. Use 100 contracts for your option quantities. Show all steps.

1 year price target= $153.54

Current Price= $207.48

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Answer #1

A 1-year price target is below the current price. So, a Bear Call Spread strategy is used to make a profit from the declining stock price.

It is constructed by selling a call option at a strike price and buying a call option at a higher strike price for the same expiry.

We could sell a call at $210 strike and buy a call at $220 strike. The credit we take is the difference between the two premiums and that will be our maximum profit.

Can you please upvote? Thank You :-)

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