Bull Call Spread : Options Strategy

Bull Call Spread is the strategy you can use to profit from moderate rise in profit of underlying security.

What you do here is that you buy  1 Call Option and also sell a higher value Put Option

Example lets say current value of nifty is 5000 and lot size is 50. If the nifty call option is available for Rs 70 for the strike price of 5000 and sell call option position of 5200 for Rs 40.

Net money taken initially would be 70-40 = Rs 30*50.

A person will profit if Nifty stays between 5070 and 5160.

Maximum profit will be Difference in strike price - Amount paid = 200-30 = 170*50

Maximum loss will be amount paid = Rs 30*50.

ON the expiry if nifty is at 5120 then first contract will give profit of 120*50 = 6000 and second contract will become worth less = 40*50 = 2000, so the net profit will be 4000.

Both the contract should have same lot size and should expire in the same series.

This strategy was buying ans selling Call Options if the same thing is done with Put options then it is called Bull Put Spread.

CRR Cut by China..India might follow

China has cut CRR ( Cash Reserve Ratio) because of the falling Manufacturing Purchasing Manager's Index to 32 month low.

India's RBI is increasing the interest continously but the market doesn't want or another rate hike so RBI following China's foot step might cut the Cash Reserve Ratio.

This bores well for banks because it will release money into the system which otherwise doesn't give any interest.

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