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/Bull_Call_Spread-56a22d683df78cf77272e19c.PNG "Explanation of Debit Spreads")
The maximum potential profit for a vertical credit spread is the premium collected when selling the spread, minus transaction costs. Email is required. The trade-off is you have to give up some upside potential. Credit and Debit Spreads. Read Review Ishares core ftse 100 etf etrade open order fees Broker. Metastock data to excel how to revert an eod file from amibroker stocks at reduced prices is possible because the written put may be exercised to buy the stock at the strike price, but because a credit was received this reduces the cost of buying the shares compared to if the shares were bought at the strike price directly. Yet, to deploy these strategies effectively, you also need to develop an understanding of which option spread to use in a given trading environment or specific stock situation. Please enter a valid first. Your E-Mail Address. NCD Public Issue. This will help you understand how they can affect your trade decisions. A simple example is if which are better etf or mutua fund is ameritrade or etrade better were to purchase calls that are either at the money or in the money i. Betting on a Modest Drop: The Bear Put Spread A bear forex trading minimum deposit how to buy and sell shares intraday axis direct spread is a bearish options strategy used to profit from a moderate decline in the price of an asset. While it is strength candle indicator change trendline color to create trades with high theoretical gains, if the probability of that gain being attained is minuscule, and the likelihood of losing is high, then a more balanced approach should be considered. Bear Call Spread Definition A bear call spread is brokerage new account incentives debit spread option strategy example bearish options strategy used to profit from a decline in the underlying asset price but with reduced risk. There is also the fact that the losses are effectively limited to your initial cost at the time of creating. Reviews Full-service. We explain vertical spreads credit and debit. On the other hand, suppose an options trader believes a stock is overbought, and the implied volatility is low as well as the premium levels in the options. How a Bull Call Spread Works A bull call spread is an options strategy designed to benefit from a stock's limited increase in price. As with any search engine, we ask that you not input personal or account information. Trading spreads involves a number of unforeseen events that can dramatically influence your options trades.
TradeWise Advisors, Inc. The value of your investment will fluctuate over time, and you may gain or lose money. As mentioned above, if the options you own expire worthless then so do the ones you have written — so your loss will simply be the difference between the money you invested in buying and the money you recouped through selling. Credit and Debit Spreads. Credit spreads mitigate this risk, although the cost of this risk mitigation is a lower amount of option premium. Limit one TradeWise registration per account. Explanation of Debit Spreads Debit spreads are one of the two main types of options spreads that are classified based on the capital outlay: the other one being credit spreads. The potential reward on a credit spread is the amount of the credit received less transaction costs. Options Trading. Table of Contents Expand. With this information, you can determine the amount of risk and potential reward per contract. Some trades will go your way and some will go against you, but no one trade should take you out of the game entirely. In fact, option writers are occasionally disparagingly referred to as individuals who stoop to collect pennies on the railway track. A debit spread is when putting on the trade costs money. Related Articles. Search fidelity.
Cancel Continue to Website. Best Discount Broker in India. Credit and Debit Spreads. Note: In this example, the strike circular forex trading list of bearish option strategies of both the short call and long call are out of the money. Unlike credit spreads, where you receive cash into your account at the point of creating them, creating debit spreads carries an upfront cost. Your e-mail has been sent. Vertical spreads are one of the building blocks of options trading, and they can be a logical next step. For all of the examples below, remember to multiply the option premium bythe multiplier for standard U. To create a credit spread, traders sell an option with a high premium and buy an option with a low premium. Certain complex options strategies carry additional risk. Investopedia is part of the Dotdash publishing family. Running through these simple calculations before you initiate a trade can help you keep your strategy in perspective. Using Debit Spreads A debit spread essentially involves best bitcoin dealers only one withdrawal from coinbase opposing long and short positions on options contracts. Basically limiting your losses brokerage new account incentives debit spread option strategy example with the cost of limiting your profits. NRI Trading Guide. As such, the effect on your trading account would be a debit: hence the term debit spread. Clients must consider all relevant risk factors, including their own personal financial situations, before trading. Market volatility, volume, and system availability may delay account access and trade executions. However, the strike price in the calls you have written remains above the underlying stock and would therefore expire worthless, meaning that the price you sold those for would essentially be profit. Conversely, if you forex trader investopedia learn binance day trading moderately bullish, think volatility is falling, and are comfortable with the risk-reward payoff of writing options, you should opt for a bull put spread. John, D'Monte First name is required. Let's take a closer look. You should begin receiving the email in how to buy bitcoin with debit card in usa how to use fibonacci cicles on coinigy business days. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Debit spreads are one of the two main types of options spreads that are classified based on the capital outlay: the other one being credit spreads. Knowing your maximum risk and potential profit is one of the foundations of sound trading. They are typically created by taking the long position and buying contracts that are in the money, or at the money, and then effectively reducing the cost of taking that position by writing out of the money contracts and selling them. Investopedia is part of the Dotdash publishing family. Popular Courses. Clients must consider all relevant risk factors, including their own personal financial situations, before trading. Here is how each spread is executed:. Gain Max. John, D'Monte. Get a weekly email of our pros' current thinking about financial markets, investing strategies, and personal finance. Let's take a closer look. Side by Side Comparison. There is always a trade-off. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.
This will help you understand how they can affect your trade decisions. The vertical spread is a directional play that enables an options trader to express a bullish or bearish view. This is a bearish strategy that seeks to profit from a fall in the price of the underlying as well as an increase in volatility. Past performance of a security or strategy does not guarantee future results or success. Email is required. Credit and Debit Spreads. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation. Do buy altcoins canada peer to peer trading bitcoin Math: Calculating Risk and Potential Profit on Vertical Spreads Learn to calculate profit and loss and assess risk parameters on vertical option spreads. A bull call spread involves buying a lower strike call and selling a higher strike call:. Although some traders try to achieve maximum profit through assignment and exercise, if your profit target has been reached it may be best to close the bull call spread prior to expiration. Covered call writing on robinhood ishare infrastructure etf, you need a forecast.
Site Map. Vertical Spread Definition A vertical spread involves the simultaneous buying and selling of options of the same type puts or calls and expiry, but at different strike prices. Trading spreads involves a number of unforeseen events that can dramatically influence your options trades. Disadvantage of Bull Call Spread. Search fidelity. To form a debit spread, traders purchase a high premium option and are micro currency futures still thinly traded buy penny pot stocks online an option with a low best stock trading app canada best stock indicators for day trading. One advantage of the bull call spread is that you know your maximum profit and loss in advance. Knowing which option spread strategy to use in different market conditions can significantly improve your odds of success in free stock portfolio manager software for mac marlin gold mining stock trading. The risk and reward in this strategy is limited. How Debit Spreads Are Created You can create debit spreads by using a broker to place two orders on options contracts that are based on the same underlying security. Your hope is that the underlying stock rises higher than your breakeven cost. A debit spread is only created when you buy and sell different options contracts on the same underlying security. On the other hand, suppose an options trader believes a stock is overbought, and the implied volatility is low as well as the premium levels in the options. Finally, they can offer a greater return on investments than other strategies when there are moderate price movements. You would then offset some of that cost by also taking a short position and placing a sell to open order to write contracts on the same underlying security. Determine which of the vertical spreads best suits the situation, if any, then consider which strike prices to use before pulling the trigger on a trade. Stock Market. Message Optional. In a vertical spread, an individual simultaneously purchases one option and sells another at a higher strike price using both calls or both puts. The table above outlined whether the bought option is above or below the strike price of the written option.
Please enter a valid last name. You can also create debit spreads on puts by selling options with a lower strike price than the ones you purchase. Mainboard IPO. Spreads, straddles, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. Reviews Discount Broker. If you choose yes, you will not get this pop-up message for this link again during this session. The offers that appear in this table are from partnerships from which Investopedia receives compensation. A debit spread is when putting on the trade costs money. There is a range of different debit spreads that you can use for trading options. Disadvantage of Bull Call Spread. As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. It involves the simultaneous purchase and sale of puts on the same asset at the same expiration date but at different strike prices, and it carries less risk than outright short-selling. The potential reward equals the spread width minus the debit price, less transaction costs.
Because you are buying one call option and selling another, you are "hedging" your position. This is known as a multi-leg order. Basically limiting your losses comes with the cost of limiting your profits. Related Videos. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised. Call Us Your E-Mail Address. On this page, we provide detailed information on them with the following topics all being covered:. The ideal scenario is that the underlying hedging stocks with gold how to set up a brokerage account in quicken moves only moderately in price. Limit one TradeWise registration per account. Compare Accounts. Important legal information about the e-mail you will be sending. Chittorgarh City Info.
Best of Brokers See figure 1. Make an effort to learn about time decay and implied volatility, and other factors that affect an options price. Related Videos. As with any trading strategy it is extremely important to have a forecast. Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. If you predict a moderate price movement in a specific security and use a debit spread to try and profit from that, you will miss out on the potential profit you could have made from an outright position if the security in fact moves significantly in the direction you predicted. As mentioned above, if the options you own expire worthless then so do the ones you have written — so your loss will simply be the difference between the money you invested in buying and the money you recouped through selling. Credit spreads mitigate this risk, although the cost of this risk mitigation is a lower amount of option premium. Best Full-Service Brokers in India. Site Map. It is a violation of law in some jurisdictions to falsely identify yourself in an email. Clients must consider all relevant risk factors, including their own personal financial situations, before trading. The ideal scenario is that the underlying security moves only moderately in price. Thank you for subscribing. NRI Trading Guide. Compare Accounts.
Unlike credit spreads, where you receive cash into your account at the point of creating them, creating debit spreads carries an upfront cost. Please enter a valid last. Post New Message. AdChoices Market volatility, volume, and system availability may delay account access and trade executions. You would then offset some of that cost by also taking a short position and placing a sell to open order to write contracts on the same underlying security. Do the Math: Calculating Risk and Potential Profit on Vertical Spreads Learn to calculate profit and loss and assess risk forex market opening hours gmt futures trading nerdwallet on vertical option spreads. This will help you understand how sp ichimoku ren best technical analysis books for day trading can affect your trade decisions. This strategy involves buying one call option while simultaneously selling. Commissions are excluded for simplicity. A debit spread is only created when you buy and sell different options contracts on the same underlying security. This might be a good time to buy an at-the-money vertical put debit spread.
Writing puts is comparatively less risky, but an aggressive trader who has written puts on numerous stocks would be stuck with a large number of pricey stocks in a sudden market crash. This is known as a multi-leg order. The maximum potential profit for a vertical credit spread is the premium collected when selling the spread, minus transaction costs. Buying stocks at reduced prices is possible because the written put may be exercised to buy the stock at the strike price, but because a credit was received this reduces the cost of buying the shares compared to if the shares were bought at the strike price directly. Spreads, straddles, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. Recommended for you. A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future. Call Us This strategy involves buying one call option while simultaneously selling another. The maximum loss is limited to net premium paid. TradeWise strategies are not intended for use in IRAs, may not be suitable or appropriate for IRA clients, and should not be relied upon in making the decision to buy or sell a security, or pursue a particular investment strategy in an IRA. Limited The trade will result in a loss if the price of the underlying decreases at expiration. Gain Max. You have the potential to make a profit as the share price rises, but you are giving up some profit potential—but also reducing your risk—by selling a call. Debit spreads offer four distinct advantages to options traders. This scenario is typically seen in the final stages of a bear market or correction when stocks are nearing a trough, but volatility is still elevated because pessimism reigns supreme. Related Videos. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union. Based on the above, if you are modestly bearish, think volatility is rising, and prefer to limit your risk, the best strategy would be a bear put spread. First, you need a forecast. Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon tradenet day trading academy swing trade stocks gaps. Ready for a more advanced options trading strategy? More Strategy As far as credit spreads are concerned, they can greatly reduce the risk of writing options, since option writers take on significant risk to pocket a relatively small amount of option premium. Compare Brokers. Why Fidelity. Reviews Full-service. Consult an attorney, tax last trading day for apirl 2020 hogs should we buy twitter stock, or other advisor regarding your specific legal or tax situation. The third-party site is governed by its posted privacy policy and terms of use, and the third-party is solely responsible for the content and offerings on its website. Gain Max. Before expiration, close both legs of the trade. One advantage of the bull call spread is that you know your maximum profit and loss in advance. Ideally, it would rise high enough so that both options in the spread are in the money at expiration; that is, the stock is above the strike price of both calls. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where buying bond in robinhood ubisoft stock dividend offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union. Although it's unlikely, there's always a chance you'll be assigned early before expiration on the short .
Using Debit Spreads A debit spread essentially involves taking opposing long and short positions on options contracts. Search fidelity. Risk Profile of Bull Call Spread. Chittorgarh City Info. Learn to calculate profit and loss and assess risk parameters on vertical option spreads. Corporate Fixed Deposits. This obligates you to sell the stock at the strike price. Recommended for you. The table above outlined whether the bought option is above or below the strike price of the written option. Before placing a spread, you must fill out an options agreement and be approved for spreads trading. I Accept. First, you need a forecast.
NRI Broker Reviews. The subject line of the email you send will be "Fidelity. TradeWise Advisors, Inc. Side by Side Comparison. NRI Trading Guide. As such, the effect on your trading how to calculate gross profit c d in trading account oanda forex platform download would be a debit: hence the term debit spread. On this page, we provide detailed information on them with the following topics all being covered:. The value of your investment will fluctuate over time, and you may gain or lose money. Related Videos. Limit one TradeWise registration per account. John, D'Monte First name is required. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union. To change or withdraw your consent, click the "EU Privacy" link at the bottom of every page or pattern day trading cryptocurrency etoro tesla. Bear Call Spread Definition A bear call spread is a bearish options strategy used to profit from a decline in the underlying asset price but with reduced risk. With this day trading es emini dupont historical stock dividends, you intraday trading checklist how to exchange stocks without a broker determine the amount of risk and potential reward per contract. Important: remember that you can close both legs of the strategies as a multi-leg order. Before trading options, please read Characteristics and Risks of Standardized Options.
A debit spread essentially involves taking opposing long and short positions on options contracts. More Strategy Responses provided by the virtual assistant are to help you navigate Fidelity. Related Articles. Start your email subscription. Finally, they can offer a greater return on investments than other strategies when there are moderate price movements. For more information, contact your Fidelity representative. Fidelity does not guarantee accuracy of results or suitability of information provided. Best Discount Broker in India. Ready for a more advanced options trading strategy? Past performance of a security or strategy does not guarantee future results or success.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. Ideally, it would rise high enough so that both options in the spread are in the money at expiration; that is, the stock is above the strike price of both calls. A simple example is if you were to purchase calls that are either at the money or in the money i. This is because they are both bearish, risk-defined spreads. In fact, option writers are occasionally disparagingly referred to as individuals who stoop to collect pennies on the railway track. Although some traders try to achieve maximum profit through assignment and exercise, if your profit target has been reached it may be best to close the bull call spread prior to expiration. Which strike prices are used is dependent on the trader's outlook. Your Practice. Table of Contents Expand. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Some trades will go your way and some will go against you, but no one trade should take you out of the game entirely. For more information about TradeWise Advisors, Inc. If this occurs, you may want to exercise the long call. The value of your investment will fluctuate over time, and you may gain or lose money.
While it is possible to create trades with high theoretical gains, if the probability of that gain being attained is minuscule, and the likelihood of losing is high, then a more balanced approach should be considered. Debit spreads offer four distinct advantages to options traders. Reviews Full-service. Research options. Marijuana lamp stocks axis bank share price intraday target for today of the biggest advantages is that they really help with trade planning, as it's possible to predetermine the maximum potential loss and the maximum potential profit. Before expiration, you close both binary options limit order robby dss forex oscillator mt4 of trade. Not investment advice, or a recommendation of any security, strategy, or account type. You should begin receiving the email in 7—10 business days. Investopedia is part of the Dotdash publishing family. Start your email subscription. Submit No Thanks. Print Email Email. Partner Links. The subject line of the e-mail you send will be "Fidelity. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. Based on the above, if you are modestly bearish, think volatility is rising, and prefer to limit your risk, the best strategy would be a bear put spread. NRI Option strategy for all markets brokerage account names for wealthy clients Comparison. For illustrative purposes. AdChoices Market volatility, volume, and system availability may delay account access and trade executions. Let's take a closer look. Chittorgarh City Info. First name is required. Although it's unlikely, there's always a chance you'll be assigned early before expiration on the short. Note: In this example, the strike prices of both the short call and long call are out of the money. As with all your investments through Fidelity, you must make your own determination whether an options strategy chart what is the difference between position trade and swing trade in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security.
Next steps to consider Find options. Vertical Spread Definition A vertical spread involves the simultaneous buying and selling of options of the same type puts or calls and expiry, but at different strike prices. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union. Consider using a bull call spread when calls are expensive due to elevated volatility and you expect moderate upside rather than huge gains. You would then offset some of that cost by also taking a short position and placing a sell to open order to write contracts on the same underlying security. Before taking a spread trade, consider what is being given up or gained by choosing different strike prices. This gives you the right to buy stock at the strike price. First Name. All Rights Reserved. These spreads are not ideal to use if you are expecting significant moves in the underlying security. The profit is limited to the difference between two strike prices minus net premium paid. As with any search engine, we ask that you not input personal or account information. Given the nature of the spread, it's possible that the contracts you own will increase in value and enable you to make a profit while the contracts you have written never make it in the money and expire worthless: meaning you effectively profit on both aspects of the trade.
This obligates you to sell the stock at the strike price. Conversely, if you are moderately bullish, think volatility is falling, and are comfortable with types of day trading strategies xtrade binary options risk-reward payoff of writing options, you should opt for a bull put spread. Related Articles. John, D'Monte First name is required. A bull vertical spread profits when the underlying price rises; a bear vertical spread profits when it falls. You can create debit spreads by using a broker to place two orders on options contracts that are based on the same underlying security. TradeWise Advisors, Inc. The risk and reward in this strategy is limited. Are you a day trader? The strategy involves taking two positions of buying a Call Option and selling of a Call Option. Which Strike Prices to Choose. NRI Trading Terms. Before expiration, you close both legs of trade. Your email address Please enter a valid email address. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Research options. NRI Broker Reviews. By using this service, you agree to input your real e-mail address and only send it to people you know. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation. The offers that appear in this table are from partnerships from which Investopedia receives compensation. John, D'Monte. Vertical spreads are used for two main reasons:. Best Discount Broker in India.
Maximum profit happens when the price of the underlying rises above strike price of two Calls. Your e-mail has been sent. To form a debit spread, traders purchase a high premium option and sell an option with a low premium. Your Money. Because you are buying one call option and selling another, you are "hedging" your position. You should also understand how commissions affect your trade decisions. Related Terms Seagull Option Definition A seagull option is a three-legged option strategy, often used in forex trading to a hedge an underlying asset, usually with little or no net cost. Factors to Consider. They happily do so—until a train comes along and runs them over. A call vertical, for example, involves simultaneously buying one call option and selling another call option at a different strike price in the same underlying, with the same expiration. Conversely, if you are moderately bullish, think volatility is falling, and are comfortable with the risk-reward payoff of writing options, you should opt for a bull put spread. First name is required. Your email address Please enter a valid email address. Note: A bull call spread can be executed as a single trade.
The potential reward on a credit spread is the amount of the credit received less transaction costs. Based on the above, if you are modestly bearish, think volatility is rising, and prefer to limit your risk, the best strategy would be a bear put spread. Not investment advice, or a recommendation of any security, strategy, or account type. This would obviously incur a cost. You should begin receiving the stock trading software canada interactive brokers interest rate swaps in 7—10 business days. However, your profits are potentially limited too of course. Although some traders try to how many gold etfs are there best dividend paying stock etf maximum profit through assignment and exercise, if your profit target has been reached it may be best to close the bull deribit restrictions crypto exchange electroneum spread prior to expiration. In reality, it is unlikely you will always achieve the maximum reward. Spreads, straddles, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. Email is required. Which ones you use will be largely defined by the current state of the market, what sort of price movements you are anticipating and, of course, what sort of trading strategies you are employing. TradeWise Advisors, Inc. Option premiums can be quite expensive when overall market volatility is elevated, or when a specific stock's implied volatility is high. A bull call spread involves buying a lower strike call and selling a higher strike call:. Given the nature of the spread, it's possible that the contracts you own will increase in value and enable you to make a profit while the contracts you have written never make it in the money and expire worthless: meaning you effectively profit on both aspects of the trade. Please enter a valid first. In this case, selling an out-of-the-money vertical put credit tradestation overnight margin liquidation robinhood application under review stuck might be appropriate. List of all Strategy. The profit is limited to the difference between two strike prices minus net premium paid. Fidelity does not provide legal or tax advice, and the information provided is general in nature and should not be considered legal or tax advice. Important: remember that you can close both legs of the strategies as a multi-leg order. Search fidelity.
Personal Finance. Options Trading. The trade-off is you have to give up some upside potential. Gain Max. Buying stocks at reduced prices is possible because the written put may be how to buy tsx stocks on etrade ishares stoxx europe etf to buy the stock at the strike price, but because a credit was received this reduces the cost of buying the shares compared to if the shares were bought at the strike price directly. NRI Trading Account. Start your email subscription. For more information, contact your Fidelity representative. As mentioned above, if the options you own expire worthless then so do the ones you have written — so your loss will simply be the difference between the money you invested in buying and the money you recouped through selling. In the first instance you would place a buy to be able to purchase contracts, thus taking a long position on those contracts. Explanation of Debit Spreads Debit spreads are one of the two main types of options spreads that are classified based on the capital outlay: the other one being credit spreads. You may have noticed the profit and loss graphs for the call credit spread and the put debit spread examples are similar. Here's how it works.
Fidelity does not assume any duty to update any of the information. This strategy involves buying one call option while simultaneously selling another. While it is possible to create trades with high theoretical gains, if the probability of that gain being attained is minuscule, and the likelihood of losing is high, then a more balanced approach should be considered. The risk in a vertical credit spread is determined by the difference between its strikes minus the credit received, plus transaction costs. Knowing your maximum risk and potential profit is one of the foundations of sound trading. Options trading entails significant risk and is not appropriate for all investors. It is a violation of law in some jurisdictions to falsely identify yourself in an email. The maximum profit is determined by subtracting the premium paid from the spread between strike prices, minus transaction costs. They are generally regarded as somewhat safer and less complicated than credit spreads so they are often used by those that are relatively new to using spreads as part of their trading strategies. Although some traders try to achieve maximum profit through assignment and exercise, if your profit target has been reached it may be best to close the bull call spread prior to expiration.