Call Spread vs Calls

Quantitative Finance Level 1

Which of the following is a definite benefit of owning a call spread rather than an outright call?

Less capital outlay Less risk More profit More trading

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Calvin Lin by Calvin Lin

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1 solution

In Call spread, you reduce your call premium(risk) by giving up your profit, if underlying rallies up.

1 Helpful 0 Interesting 0 Brilliant 0 Confused

It should be less capital outlay initially in terms on partial premium being covered. There is reduced upside though

Ankit Goyal - 2 years, 12 months ago

I would agree with Ankit

Aditya Bhutra - 2 years, 3 months ago

Yes, agree with Ankit also. You have used one of the other answers to select the correct answer. Risk is not defined clearly in the question so could assume same notional exposure of call and call spread.

Steve D - 1 year, 3 months ago

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