Quantool · Reading CoursesFictional examples · no live trading
Core Options · OPT-03c · Core

Call credit vertical

How does call credit vertical express a bearish-to-neutral view?

One concept per page · original written lesson · 567 prose words · authored, not installed or production-approved

What you will learn and prerequisites

Read first: Read a contract and its premium, Rights, obligations and expiration, Defined payoff risk is not margin, Read the whole multi-leg ticket

A call credit vertical accepts a bounded amount of upside risk. It can win during a decline, sideways trade or a sufficiently small rise. The important boundary is the short strike and credit, not simply whether the stock is red.

Construction: read every leg

Sell the 105 call at 2.20 and buy the 110 call at 1.00. Credit is 120. The five-point terminal liability caps loss at 500−120=380. Breakeven is 106.20. A received credit is payment for an open obligation, not profit at entry.

Read the ticket before the graph

BUY means you own an option right; SELL means you accept a short-option obligation. Positive quantities are long and negative quantities are short in the calculation. Check quantity, call/put, strike, multiplier and expiry before netting premium.

All legs in this example share November 20, 2026 expiration. The entry observation is October 6, 2026, with fictional QLT at 100. These are independent illustrative premiums, not a current option chain or executable quotes. The terminal diagram assumes every leg and any shares are resolved at one common settlement price.

Before expiry: time and volatility

Near the short strike, short-Gamma and short-Vega effects often dominate. Net signs can change elsewhere. Near expiry a quiet position can become sensitive quickly if spot approaches the short option.

Manage the position deliberately

Closing at 0.40 after receiving 1.20 realizes 80 before costs. The last 40 available is not automatically worth retaining the obligation. Reassess accepted trade through the short strike rather than assuming an earlier resistance level must hold.

Fictional teaching ticket · no order submission

Call credit vertical

QLT • reference spot $100 • independent illustrative prices • quote date 2026-10-06

Read action, quantity, type, strike, expiry, premium and multiplier before the payoff
ActionQtyTypeStrikeExpiryPremium/unitMultiplier
SELL1Call1052026-11-202.2100
BUY1Call1102026-11-201100
Opening option cash (+received / −paid)120 USD
Entry option fees in cost variant1.3 USD
Shares included0
Joint-terminal results—not a guarantee of interim cash requirements
MeasureBefore costsAfter stated entry fees
Maximum terminal profit120118.7
Maximum terminal loss magnitude380381.3
Breakeven settlement price(s)106.2106.187

This is a mathematical expiry experiment using the displayed legs, not an executable quote. The slider range is not a risk limit.

$0.65 per option contract on entry only. No exit, assignment, financing or tax costs modeled.

Independent fictional premiums, not one simultaneous arbitrage-consistent chain. All legs realized simultaneously at intrinsic at the same expiry; terminal calculations do not model American early exercise, temporary unhedged positions, forced liquidation or live liquidity. Displayed chart domain is not a tail-risk cap.

From opening cash to a settlement result

Read the opening instructions: sell 1 105 call at 2.20; buy 1 110 call at 1.00. Option opening cash is $120.00 received as a credit. A received credit is not earned profit while the obligation remains open.

Set the common settlement price to 108.00. Calls have intrinsic value max(S−K,0); puts have max(K−S,0). Subtract the opening premium from each intrinsic value, then multiply by signed quantity and the 100-unit multiplier. Shares contribute their price change from their own cost. The calculation popup shows every leg.

The combined result is $-180.00 before costs and $-181.30 after illustrative opening fees of $1.30. Exit fees, slippage, funding, dividends and taxes are not included. Opening fees are 0.65 per option contract, not a statement of any broker's pricing.

Maximum terminal profit is $120.00; maximum terminal loss magnitude is $380.00, before costs. Isolated zero-P/L settlement points in the model: 106.2. Move the scenario slider across each strike and explain why the slope changes there. A strike is a contract threshold, not a prediction.

This terminal model is useful for comparing risk shapes, but actual American-style assignment, share delivery, forced liquidation or a failed multi-leg exit can produce a different path. A long protective leg is not an automatic instruction that a broker must exercise it when another leg is assigned.

Open the calculation without leaving this lesson

Calculate this exact ticket

Same-page calculation. Closing restores the lesson position and originating control.

P/L = Σ[q × multiplier × (intrinsic − opening premium)] + shares × (S−share entry) − costs

Intrinsic is nonnegative before the signed quantity is applied. This is a fictional terminal calculation.

  1. -1 × 100 × (3.00 − 2.20) = $-80.00: 105 call.
  2. +1 × 100 × (0.00 − 1.00) = $-100.00: 110 call.
  3. Opening fees: 1.30.
Before costs $-180.00; after entry fees only $-181.30.

Maximum risk and breakevens

Same-page calculation. Closing restores the lesson position and originating control.

Evaluate S=0, all strikes and the final tail slope; solve P/L=0 on each linear segment.

Same-expiry payoffs are piecewise linear. A finite chart range cannot prove a tail is bounded.

  1. Maximum terminal profit is $120.00; maximum terminal loss magnitude is $380.00, before costs.
  2. Breakeven points: 106.2.
  3. Costs shift net P/L downward without moving the strikes.
Maximum terminal profit is $120.00; maximum terminal loss magnitude is $380.00, before costs.

The whole ticket at common expiry

Vertical: P/L per complete ticket (USD)
Horizontal: Underlying settlement price (USD)

The whole ticket at common expirySolid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range. The complete numerical data are available below.-426.417-308.11-189.803-71.496646.8102165.1179097104111118125
1. Combined terminal P/L before fees2. Combined terminal P/L after entry fees
Solid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range.
See the individual legs behind the combined curveThe whole ticket at common expirySolid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range. The complete numerical data are available below.-2,066.2-1,315.72-565.24185.24935.721,686.29097104111118125
1. Combined terminal P/L before fees2. Combined terminal P/L after entry fees3. Leg 1: SELL 1 105 call4. Leg 2: BUY 1 110 call
Read the graph as a data table
Complete graph data; original fictional observations or model calculations
Underlying settlement price (USD)Combined terminal P/L before feesCombined terminal P/L after entry feesLeg 1: SELL 1 105 callLeg 2: BUY 1 110 call
90120118.7220-100
90.4375120118.7220-100
90.875120118.7220-100
91.3125120118.7220-100
91.75120118.7220-100
92.1875120118.7220-100
92.625120118.7220-100
93.0625120118.7220-100
93.5120118.7220-100
93.9375120118.7220-100
94.375120118.7220-100
94.8125120118.7220-100
95.25120118.7220-100
95.6875120118.7220-100
96.125120118.7220-100
96.5625120118.7220-100
97120118.7220-100
97.4375120118.7220-100
97.875120118.7220-100
98.3125120118.7220-100
98.75120118.7220-100
99.1875120118.7220-100
99.625120118.7220-100
100.062120118.7220-100
100.5120118.7220-100
100.938120118.7220-100
101.375120118.7220-100
101.812120118.7220-100
102.25120118.7220-100
102.688120118.7220-100
103.125120118.7220-100
103.562120118.7220-100
104120118.7220-100
104.438120118.7220-100
104.875120118.7220-100
105120118.7220-100
105.31288.7587.45188.75-100
105.754543.7145-100
106.1881.25-0.05101.25-100
106.2-2.70006e-13-1.3100-100
106.625-42.5-43.857.5-100
107.062-86.25-87.5513.75-100
107.5-130-131.3-30-100
107.938-173.75-175.05-73.75-100
108.375-217.5-218.8-117.5-100
108.812-261.25-262.55-161.25-100
109.25-305-306.3-205-100
109.688-348.75-350.05-248.75-100
110-380-381.3-280-100
110.125-380-381.3-292.5-87.5
110.562-380-381.3-336.25-43.75
111-380-381.3-3800
111.438-380-381.3-423.7543.75
111.875-380-381.3-467.587.5
112.312-380-381.3-511.25131.25
112.75-380-381.3-555175
113.188-380-381.3-598.75218.75
113.625-380-381.3-642.5262.5
114.062-380-381.3-686.25306.25
114.5-380-381.3-730350
114.938-380-381.3-773.75393.75
115.375-380-381.3-817.5437.5
115.812-380-381.3-861.25481.25
116.25-380-381.3-905525
116.688-380-381.3-948.75568.75
117.125-380-381.3-992.5612.5
117.562-380-381.3-1,036.25656.25
118-380-381.3-1,080700
118.438-380-381.3-1,123.75743.75
118.875-380-381.3-1,167.5787.5
119.312-380-381.3-1,211.25831.25
119.75-380-381.3-1,255875
120.188-380-381.3-1,298.75918.75
120.625-380-381.3-1,342.5962.5
121.062-380-381.3-1,386.251,006.25
121.5-380-381.3-1,4301,050
121.938-380-381.3-1,473.751,093.75
122.375-380-381.3-1,517.51,137.5
122.812-380-381.3-1,561.251,181.25
123.25-380-381.3-1,6051,225
123.688-380-381.3-1,648.751,268.75
124.125-380-381.3-1,692.51,312.5
124.562-380-381.3-1,736.251,356.25
125-380-381.3-1,7801,400

The failure case

At 111 the short call owes 600 intrinsic and the long receives 100. Net liability is 500; after credit the loss is 380. A stop or long wing does not guarantee a convenient early exit.

Check your understanding

Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.

What is whole-position terminal P/L at QLT 108.00, before costs?

Reveal the worked answer

$-180.00

Use all signed legs, not just the winning leg. The popup and graph use the same ticket.

Critical risk question

Does a terminal loss bound guarantee every early-assignment or liquidation outcome?

Reveal the worked answer

No.

It describes the specified common-settlement payoff. Product rules, stock delivery, capital and execution still matter.

Takeaway

Explain the intended bearish-to-neutral exposure, each leg's obligation and the adverse price region before using the strategy name.

Sources, assumptions and downloadable script

External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.

Read this lesson as Markdown · Download its JavaScript content module