⚔ Module 5: Vertical Spreads

Buy a call at strike K1, sell a call at strike K2 (K2 > K1). The sold call partially finances the bought call. You profit from moderate price rises.

When to use: You are moderately bullish, expect a price rise to approximately K2, but want to risk less capital than with a pure long call.

💡 sTraderZ.com recognises a Bull Call Spread as Long Call (lower strike) + Short Call (higher strike) (📈 Bullish).

Sell a put at strike K1 (higher), buy a put at strike K2 (lower, K2 < K1). You receive a net premium and profit when the price stays above K1.

When to use: Bullish-neutral, you expect the price to stay above K1. Lower risk than a pure short put as the long put acts as a buffer.

💡 sTraderZ.com recognises a Bull Put Spread as Short Put (higher strike) + Long Put (lower strike) (📈 Bullish).

Sell a call at strike K1 (lower), buy a call at strike K2 (higher). You receive a net premium and profit when the price stays below K1.

When to use: You are bearish-neutral, expecting stagnating or falling prices. The long call caps the loss risk on the upside.

💡 sTraderZ.com recognises a Bear Call Spread as Short Call (lower strike) + Long Call (higher strike) (📉 Bearish).

Buy a put at strike K1 (higher), sell a put at strike K2 (lower). The sold put reduces the cost of the long put. You profit from moderate price declines.

When to use: You expect a moderate price decline to approximately K2. Cheaper than a pure long put, but upside is capped at K1 − K2 − Debit.

💡 sTraderZ.com recognises a Bear Put Spread as Long Put (higher strike) + Short Put (lower strike) (📉 Bearish).