Call Spread Profit: The Expiration Ceiling Explained
Summary
Hollow Point Trading shares a short video explaining why a call spread has an expiration ceiling. Using a $50/$55 spread with a $2-per-share debit, it shows how the $5 strike width caps spread value and limits maximum profit to $3 per share before costs.
https://youtu.be/4wP1-pcWWtk
A call spread has an expiration ceiling #Shorts
A rising stock does not give a call spread unlimited upside. Imagine buying a fifty strike call and selling a fifty five strike call on the same stock, with the same expiration. The net debit is two dollars per share. At expiration, the spread value cannot exceed the five dollar strike width. Maximum profit is three dollars per share before cost...
