Alternative to bull call spreads

[Eliot Hosewater]

Quote from forex-forex:

I like this example and it shows very clearly the possible outcome of both trades. As mentioned earlier the example should have had the same strikes for the long calls, but that's a moot point.

Well, it show the possible outcomes of one example.

OTOH, if you put on a 170/175 bull spread on AAPL on Monday you would have made maybe $2.50. With a 175 call with a stop you would have made much more (I don't have the Monday/Tuesday prices, but you might have made maybe $8-10 even with the volatility collapse).

Maybe it's something to think about as an alternative to an iron condor before an earnings announcement.

 

[spindr0]

Comparing a 170/175 bull spread with a long 175 call is apples and oranges. Different long strikes introduces another variable, namely amount ITM.

Be that as it may, your profit guesstimate is way too high. With a delta of less than 10, on a 12 pt move, the spread makes approx $1.20 and the long call nets maybe $7.00 before IV collapse (delta around 50). Maybe a net of $5.00

Given the context of the thread, a stop would be worthless in this situation. AAPL was up over 12 pts at the open Tues. Had it been 12 pts down at the open, the long call would have been down 7 pts at the get go (delta loss plus IV collapse). A stop would have been worthless.