Implementation: Sell a call and buy a higher strike cheaper call for protection
- Sell 1 ITM Call option (Leg 1 - LS Large premium)
- Buy 1 OTM Call option (leg 2 - HS Small Premium)
Key trigger points:
- Spread = Difference between the strikes
- Net Credit = Premium Received – Premium Paid
- Breakeven = Lower strike + Net Credit
- Max Profit = Net Credit (at or below LS)
- Max Loss = Spread – Net Credit (at or above HS)