InvestorQ : How to effectively use bull call spreads as a view on range bound markets?
Aashna Tripathi made post

How to effectively use bull call spreads as a view on range bound markets?

Answer
user profile image
Tisha Malhotra answered.
2 years ago


The downside of the covered call strategy is that the downside risk is open. That problem can be resolved using a covered call. This is also a moderately bullish strategy. What you do in this case is you buy a lower strike call and sell a higher strike call. So your maximum loss is limited to your net premium. In the case of Reliance, you can buy a 960 call option at Rs.25 and sell a 990 call option at Rs.10. Your maximum loss will be the net cost of Rs.15. This is an improvement on the covered call strategy in the sense that the downside risk is also covered. In a nutshell, there are unique option strategies that you can employ under different market conditions and under different market views. That is how you can make the best of options.