I was wondering if someone could answer a relatively simple question for me. Actually two. I have not yet traded options but I am looking at the various different combinations that one can use to make a profit. I'm not sure what this is called but it involves buying an in the money call and selling an out of the money call. First of all, am I correct in saying that is is possible under this combination for one to make a profit even if the underlying stock drops slightly before expiration. This being the case since the call sold helps defray the cost of the call purchsed and due to the fact the out of money call is mostly time premium while in the money is more intrnsic value. My other question is how margin with a broker works. I know selling naked puts you must have some margin available to buy if the stock is put to you. When only buying calls you only need enough capital to cover the purchase of the calls. In the combination I describe does one need margin to cover the sold call or is the fact you own a call of a lower strike sufficient.