Now that $Tesla (TSLA.US)$ is at 193, let's say you believe...
Now that $Tesla(TSLA.US$ is at 193, let's say you believe that TSLA will increase moderately in the near future. Here's how you could use a bull call spread to potentially profit from this move:
Buy a TSLA call option with a lower strike price. For example, you could purchase a TSLA call option with a strike price of $200 that expires in 30 days for $2 per contract.
Sell a TSLA call option with a higher strike price. For instance, you could sell a TSLA call option with a strike price of $225 that expires in 30 days for $1 per contract.
By creating this vertical spread, you limit your potential losses while having a known maximum profit. In this case, your maximum profit would be $1 per contract ($2 - $1), and your maximum loss would be $1 per contract ($2 - $1).
If TSLA closes at or above $225 on the expiration date, you earn a profit of $1 per contract. However, if TSLA doesn't reach $225 or above, you lose the $1 per contract you paid for the spread.
Sell a TSLA call option with a higher strike price. For instance, you could sell a TSLA call option with a strike price of $225 that expires in 30 days for $1 per contract.
By creating this vertical spread, you limit your potential losses while having a known maximum profit. In this case, your maximum profit would be $1 per contract ($2 - $1), and your maximum loss would be $1 per contract ($2 - $1).
If TSLA closes at or above $225 on the expiration date, you earn a profit of $1 per contract. However, if TSLA doesn't reach $225 or above, you lose the $1 per contract you paid for the spread.
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Hello13456 : Why is it necessary to set a one-month expiration date?
Janice WilliamOP Hello13456: It doesn’t have to be a one-month contract. That was just an example. Usually it’s weekly for stocks
73159901 : I generally don't play regular options; I have more cyclical options. I also use quarterly option gambling earnings reports