👨‍🏫 Gain and Premium For a Bull Spread

Imagine a bull spread constructed from two call options. One call option has a strike price of $29 and the other has a strike price of $30. The premia of the two call options are $4 and $3.50, respectively. Construct a table with the P/L for each option and the P/L for the position as a whole. Be sure to show the stock price at which the spread has its maximum gain, its maximum loss, and just breaks even.

✔ Click here to view answer

	S=$27	S=$28	S=$29 (=K)	S=$29.50	S=$30 (=K)	S=$31
Buy K=$29 Call ($4)	-$4	-$4	-$4	$.50-$4 =-$3.50	$1-$4 =-$3	-$2
Sell K=$30 Call ($3.50)	$3.50	$3.50	$3.50	$3.50	$3.50	$3.50-$1 =$2.5
Bull Spread	-$.50 max loss	-$.50 max loss	-$.50 max loss	$0 Break-even!!	$.50 max gain	$.50 max gain