Debit Call Spread: Fifth Lesson

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EDUCATION ONLY

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An investor buys a Call Debit Spread when he is bullish on a security.

To Open a Call Debit Spread

Buy a Call

Sell a Call

Create a Buy Call and immediately a Sell Call with a higher strike price.

Both calls have strike prices higher than the equity market price.

Review the Call Debit Spread before entering it. Ensure the desired maturity date.

The maximum gain is 100 times the difference between the sell and the buy strike prices when the security price at maturity date is higher than the strike price of the sell order.

The investor has a partial gain when the security price at maturity date is between the strike prices of the call and the sell orders.

The investor loses the option premium when the security price at maturity date is lower than the strike price of the buy order.

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