Bull Call Spread with Long Put

Discussion in 'Options' started by countdrak, Jun 21, 2013.

  1. I am trying to understand the upside/downside of doing something like this. Couldn't find much information online.

    Taking BBRY as an example. Results are out on June 28th.

    Stock Price - $13.97
    Buy 1 Call for Jul 5th at strike price of $14
    Sell 1 Call for Jul 5th at strike price of $15
    Buy 1 Put for Jul 5th at strike price of $13

    Does this even make sense? So I cap my profit if the the results are great and the stock goes above $15, but in case it spirals downward I also protect myself with a PUT.

    I am guessing there is no time value on the PUT so it may not move at all? I am new to this so understanding different strategies.

  2. The best way to go about analyzing an idea like this is to put it into your trading platform's risk profiler and see what the p/l graph looks like. I have attached it from ToS. In this particular case, you are paying so much for the downside put (which is all time value right now as it is out-of-the-money) that it negates any potential gains from the long call spread, so after factoring in commissions you really only end up making money if BBRY goes below 12. By playing around with spreads, strikes, # of contracts, etc., you should be able to find something that gives you some upside with some degree of downside protection.
  3. Petro


    not sure what the prices were when you first posted this, but here is the issue I'd have with putting this play on. You'd pay .84 for the C14's and .60 for the P13's and receive .50 for the C15's. Net out, you're paying .94 to enter the position and that's not including commissions. If BBRY reports smashing earnings and the stock rockets, you're capping your gain at $1, but paid .94, thus making a whopping $0.06 and your commissions to get in and out probably eats up all of that. If they miss and badly and the stock tanks, you need it to tank below $12 for you to really make any $$. Risk/Reward doesn't seem worth it.
  4. Thank you guys! I am still learning, so this type of analysis and insight is very helpful...Appreciate it! I keep playing with the numbers..