So… what’s the purpose of these two? Be high on net credit and protect your position on either plummeting or sky rocketing of the stock price? (of course depending on strategy)
Am I right on this one?
The profit on a bear call spread is the same as on a bear put spread (assuming that the options are fairly priced; if not, there’s an arbitrage opportunity with a box spread).
The profit on a bull put spread is the same as on a bull call spread (assuming that the options are fairly priced; if not, there’s an arbitrage opportunity with a box spread).
Do whatever suits your fancy.
(Note that if you’re strapped for cash, these spreads have merit.)
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Thanks S, kind as usual.
My pleasure.
I have a doubt regarding bull/bear spread strategies. With the attached text (image) how i am suppose to know if they are asking me for a bear spread using calls or puts?
Thanks in advance.
With only that information, you cannot know.
On the exam, they’ll either specify whether you’re to use puts or calls, or else there will be options given to you that will allow you to employ only one of those approaches.
Thanks for your response… i believe your are right. But it is confusing since this question comes from the official CFA webpage.
Anyway, thanks for your help.