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Long Call Diagonal Spread for Beginners: Options Learning Center
Description
The long call or bull call diagonal spread, also known as a poor man's covered call, is a long call diagonal option strategy where you expect the underlying security to remain stable or slightly increase in value. The long call diagonal option strategy involves buying a longer-term expiration call option and selling a nearer-term expiration call option at a higher strike price.
The maximum loss is the difference between the premium paid for the long call and the premium received for the short call (Net Debit). Maximum profit is the difference in strike values minus the Net Debit, if the spread is closed at the first expiration date.
The bull call diagonal strategy succeeds if the security price is above breakeven (lower strike + Net Debit) at expiration. Maximum profit is achieved if the security price is at or below the higher strike price at expiration.
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