COVERED CALL SPREAD PAYOUT EXAMPLE

​

The example below illustrates the payout of a Covered Call Spread, consisting of the combination of a long stock position, a short lower strike call and a long higher strike Call, all for equal units of underlying.

​

The investment in the strategy is $90, providing a small amount of leverage per unit of underlying. The Lower Strike Call costs $13 and the High Strike Call costs $3. The Time Value costs of the premiums in the example offset each other.