converting long calls to more bullish spreads

[rjjaz]

Hi - want to understand if this is a more bullish position.

Suppose one has the AAPL Jan 2016 130 calls.

One can then sell a higher strike call (say the 160's), and take in some premium (netting to cash). Of course this is less bullish as it limits upside.

HOWEVER, suppose one then takes the cash from the short leg of the spread made above, and then purchases a more bullish 140/160 call spread?

So the 1 130 call
is converted to a 130/160 bull call spread AND some quantity of a 140/160 bull call spread.

How do I evaluate whether these two spreads are more bullish than the orignal outright vanilla call?

If a price target is required, let's say the target is the 160.

Thanks for your expertise.

 

[xandman]

add up your deltas

 

[OTM-Options]

Do not micro-manage the original long AAPL Jan 2016 130 call position. Turning it into a 130/160 debit spread for only $0.55 is foolish.

 

[rjjaz]

Do not micro-manage the original long AAPL Jan 2016 130 call position. Turning it into a 130/160 debit spread for only $0.55 is foolish.

Well the objective was to use the cash to also obtain a 140/160 spread

 

[rjjaz]

add up your deltas

Would love some basic assistance in doing so

 

[OTM-Options]

Well the objective was to use the cash to also obtain a 140/160 spread

Yes ..... The objective of a debit spread is always to bring in some premium and perhaps spend it on something. But that "premium" is just peanuts in disguise.

IMO ..... Long call or put positions are far superior to debit spreads.

 

[xandman]

Would love some basic assistance in doing so

Research the delta for each option contract. Your trading platform should provide this. Add up the long positions and subtract the short position.

 

[ironchef]

IMO ..... Long call or put positions are far superior to debit spreads.

Appreciate if you can explain why that is so?

Thanks.

 

[OTM-Options]

IMO ..... Long call or put positions are far superior to debit spreads.

Appreciate if you can explain why that is so? Thanks.

The premium collected isn't worth the potential loss of profit.

 

[rjjaz]

Research the delta for each option contract. Your trading platform should provide this. Add up the long positions and subtract the short position.

1. Delta of long call times quantity (the number of contracts)

VS.

2. Delta of spreads which are:
Delta of long calls - delta of short calls times quantity (do it again for second spread). Then add the deltas?

Ultimately, Both deltas in 1 vs 2 will assumedly be positive.

Then what is the next step?