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**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

2. Subtract the OPEN premium from the CLOSE premium X 100

**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

CALL – Ask $55.00 @ 5.00 = $2.50 Premium

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

___B. Wait until you receive your monthly statement

___C. Subtract the open premium from the close premium X 100

**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

2. Subtract the OPEN premium from the CLOSE premium X 100

**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

___B. Add $2.00 to $3.50

___C. Not now please

**Question #4:**

To calculate the profit of this Bear Put Spread order:

___A. I need a calculator

___B. Subtract $2.00 from $3.50

___C. Subtract the OPEN premium from the CLOSE premium

**HOW TO CALCULATE BEAR PUT VERTICAL LOSS**

**MAXIMUM Loss** (cannot lose more than this amount):

The initial amount you paid for the Premium

when opening the spread- $150.00

**Answers: #1: C — #2: B –#3: A — #4: C**

Please scroll way down to: “Vertical Spread Option Transaction Reconciliation”