## OPTIONS IS NOT A GUESSING GAME !

You always know the MAXIMUM profit you can make

AND

the MAXIMUM amount you can lose before opening an order!

### HOW TO CALCULATE BULL CALL VERTICAL SPREAD – PROFIT

MAXIMUM PROFIT (Cannot make more than this):

1. Must be in-the-money

Example to calculate profit:

Stock Price: \$58.15
OPEN Order: CALL – Ask 55.00 @ 3.50
CALL – Bid 57.50 @ 2.00 = \$1.50 Premium
X 100 = \$150.00

Stock Price: \$63.50 —
CLOSE Order: CALL – Bid \$57.50 @ 2.50
X 100 = \$250.00

CLOSE premium (\$2.50) Minus OPEN premium (\$1.50) = \$1.00 X 100 = \$100.00

WANT:
1. Stock price to increase
2. Stock price to pass both strike prices.
3. Both strike prices in-the-money.

Question #1:

To calculate the profit on the above Bull Call Spread order:
___A. Subtract \$58.15 from \$63.50

Question #2:

To calculate the premium to OPEN the above Bull Call Spread order:
___A. Subtract \$55.00 from \$57.50
___B. Subtract \$2.00 from \$3.50
___C. Subtract \$55.00 from \$58.15

HOW TO CALCULATE BULL CALL VERTICAL SPREAD — LOSS

MAXIMUM Loss (cannot lose more than this):
The initial amount you paid for Premium when opening
the spread (\$1.50 X 100 = \$150)

### HOW TO CALCULATE BEAR PUT VERTICAL SPREAD – PROFIT

MAXIMUM PROFIT (cannot make more than this amount)

1. Must be out-of-the-money

Example to calculate profit:

Stock price: \$41.00
OPEN Order: PUT – Ask \$40.00 @ 3.50
PUT – Bid \$35.00 @ 2.00 = \$1.50 Premium
X 100 = \$150.00

Stock Price: \$34.00
CLOSE Order: PUT – Ask \$40.00 @ 7.50
PUT – Bid \$35.00 @ 2.50 = 5.00
X 100 = \$500.00

CLOSE premium (\$5.00), Minus OPEN premium (\$1.50) =  (\$3.50 X 100)= \$350.00 Max Profit

WANT:
….Stock price to DECREASE.
…Both Bid and Ask to be out-of-the-money.

Question #3:

To calculate the premium to OPEN the above Bear Put Spread order:

___A. Subtract \$2.00 from \$3.50

Question #4:

To calculate the profit of this Bear Put Spread order:
___A. I need a calculator
___B. Subtract \$2.00 from \$3.50