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Strategies & Market Trends : Calls and Puts for Income
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To: Elmer Phud who wrote (999)7/22/2007 9:38:42 PM
From: kaka  Read Replies (1) of 5891
 
Hi ephud,

When you buy the lower strike and sell the higher strike in the same month, you are buying a vertical spread. With most spreads, you'd like the underlying to peg the short strike, or in this case be higher; then you'll be assigned on the long and the short, profit the $5.00 spread, less what you originally paid for the trade, ~$3.35 is the mid price now.

cheers,
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