Chambal Fert ( Nse Jan Fut 35.75 ) - Lot size 3450.(Initiate both position Simultaneously )
1)Buy (1 lot) Call Option Chambal Fert of Jan Month Strike Price 35 @ 2.90 Rs
Premium Paid = 2.90*3450 = 10005 Rs
2)Sell ( 1 lot ) Call Option Chambal Fert of Jan Month Strike Price 40 @ 1.10
Premium Received = 3450 * 1.10 = 3795 Rs
Net Premium Paid = 10005 - 3795 = 6210 Rs
Maximum Profit in this strategy = 40+1.10-35-2.90 = 3.2 *3150 = 11040 Rs
Maximum Loss in this strategy = 2.90 -1.10 = 1.8*3450 = 6210 Rs
Note : In Bullish Vertical Spreads using calls : Buy lower strike price options & Sell higher strike price options.
Here we are buying lower strike price calls, which are costlier, i.e. premium are higher & selling higher strike price calls , where premiums are lower. Hence is this strategy there would be net outflows of premiums of net debit. This is a net debit strategy.
Net debit & net credit are the terms used in options.
Maximum profit will be earned if Chambal Fert Fut moves up till expiry. All the rates above are without brokerages, so net profit / loss will vary accordingly.
Point to Remember : To trade in Options you need to have a clear view of the markets ( UP /DOWN/FLAT ) & knowledge about the Moneyness, Stike Price, Time Value & its logics.
Note : The Bullish Vertical Option strategy was initiated to Paid Members on 14th Jan 2008