13.1 – Understanding the Bull Call Spread
As we’ve learned from the previous videos, if you have a bullish view on a stock, you can buy a call or sell a put. But naked options trades can be risky if your view is wrong. We will learn more in this video.
We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- A moderate move would mean you expect a movement in the stock/index, but the outlook is not too aggressive
- One has to quantify ‘moderate’ by evaluating the volatility of the stock/index
- Bull Call spread is a basic spread that you can set up when the outlook is moderately bullish
- Classic bull call spread involves buying ATM option and selling OTM option – all belonging to same expiry, same underlying, and equal quantity
- The theta plays an essential role in strike selection
- The risk-reward gets skewed based on the strikes you choose
Hello karthik Ji,
I have already posted my query on 14.07.22 but still I didn’t get response from your end, so I am posting my query one more time.
First of all thank you for such a beautiful content.
I have a query, it may not make any sense at this stage after reading all these wonderful modules by you & team, but I am really eager to know. Kindly provide your view on this. Query is as follows:
How can anyone know within how many days one’s target will be achieved? I know from TA, using S&R levels or any other method one can expect what target can be expected in market. But it mentioned nowhere how to know time period within which one can expect these targets can be achieved. I think it is very much important to know this, because without knowing this time period one cannot choose correct strike option (whether Far OTM/ OTM/ ATM/ ITM to choose) either within 1st of of series or within 2nd half of series
I know you have already mentioned in one of the comment that one will develop this time period view with time, but I am still not able to do so. Because of this reason I am posting this comment.
Your guidance on this please.
Thank you in advance.
Nagesh, you actually answered it yourself 🙂
There is no way to figure the time it will take for your strategy to hit your target. That said, sometimes you can guess that the trade you take will be a quick one. But there is no backing for such claims (for example a stock in a breakout, target will hit soon). However, if you feel you are stuck in a trade for long, then maybe its a good idea to have time based stoploss and move to other compelling opportunities.
Aren’t the articles on varsity too outdated to invest time and energy on?
I guess most of the new age learners prefer visual learning rather than reading lengthy chapters.
There must be some reason behind YouTube influencers experiencing millions of views even though they are far from being any good.
Think! and Think again – while I spread the words of how tactically you guys have skipped important topics and just made videos on basics so that amateurs are tricked into trading asap, enabling Zerodha to make money out of innocent people Loss.
Remember – Half knowledge is Dangerous than no knowledge
Mohit, when we announced the videos, we put this posy for public – https://zerodha.com/z-connect/varsity/introducing-varsity-video-series , here is an extract from that post –
So if you are watching these videos, use them as a quick start tool. Use it to quench your curiosity, but come back to the main website or the app to learn all the technicalities.
It is best to supplement the video content with the web content and vice versa. Do not take the Varsity video series as your only source to learn the subject. I’m pretty confident that you will extract maximum value from the video series with this approach in mind.
After learning the intrigues of this hedging strategy, I’m still grappling with the fact that how to place the bull spread trade in kite app???
What part are you fining difficult Rajesh?
I am very new to this trading. Assuming bulish on Bandhan Bank 3 lots took long position for expiry 25 Jan [email protected] 250 (ATM)on 11 Jan 2022. Now its huge loss. Can i adopt hedging now by selling in the same method of bull call spreading.
YOu can, but chances are that you’ll lose more money. I’d suggest you take the hit and wind up. But if you insist on adjusting, sell OTM Calls and hedge your position.