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We received a question from Vijay K, one of our readers of the “Mastering Derivatives” column. The query relates to our article about converting a loss-making bull call spread to a ratio spread publis
How you should convert a long call to a bull spread Useful when the underlying is likely to rebound soon after its drop So far, we have discussed setting up option strategies. We now shift our discussion to managing these strategies. What should you do when your long call position accumulates losses as the underlying moves in the opposite direction? This week, we show how to recover unrealised losses on a long call by converting the position into a bull spread. Conversion spread Suppose you buy the 14400 call expecting the underlying to move from 14359 to 14750. Note that you will have to app...