Back Spread w/ Calls

Name: Back Spread w/ Calls

Setup: Sell (short) Strike A call and Buy (long) 2 Strike B calls

Bias: Very Bullish

 

Break-Even: Strike B + Max Profit

 

Max Profit: Unlimited

Max Loss: Strike B – Strike A – Credit received

Margin: Margin requirement equals the difference between the strikes of the short call spread

Time Decay: Time Decay is mixed on this play and depends where the underlying price is relative to the strikes.  If the underlying is below Strike A then time decay is a positive effect as it will allow your options to expire worthless and to collect the credit.  If the underlying is above Strike A time decay is a negative effect as it will eat away at the long calls value.

Implied Volatility: An increase of implied volatility will be a positive effect on this play.  It will increase the value of your options plus it will set your play up for a big move which is what you want

Notes: None at this time

Featured in Trade Review: None at this time