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intro to spreads

Long Call Vertical

Analyzing the risk profile of a long call vertical

Long Call Verticals Compared To Long Shares

Now, let's compare the risk profile of a long call vertical to that of 100 long shares. Both positions would profit in a market rally, however the long call vertical has a much lower potential for profit. On the other hand, long shares carry far more risk than the vertical. Beyond a certain width of spread, however, the odds of reaching either strike become so low that the risk in both strategies become very similar.
Figure 1 Figure 2 Figure 3

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