I have strapped on quite a few of these vertical bull call spreads across many asset classes this year, and they are a major reason why I am up 12%, twice the return of the S&P 500 and three times the Dow industrial average.
To understand this trade, I have used Facebook (FB) as an example today. I have been positive about this company for some time now.
Buy the Facebook November 2016 $115-$120 in-the-money bull call spread at $4.02 or best.
To accomplish this, execute the following trades (these use Wednesday's closing prices):
- Buy 25 November 2016 Facebook $115 calls at $15.30.
- Sell short 25 November 2016 Facebook $120 calls at $11.28.
- Net Cost: $4.02
This gets traders into the position at $4.02, which cost them $10,050 ($4.02 per option x 100 shares per option x 25 contracts).
The vertical part of the description of this trade refers to… Read More …
