1, Bull Call Spread (Less Protection, Lower Cost)
A bull call spread can hedge downside risk while keeping some upside potential. You buy a lower strike call and sell a higher strike call, reducing the cost.
Example: $130/$150 Call Spread
- Buy a $130 call for $9.50
- Sell a $150 call for $1.20
- Net cost per share: $9.50 - $1.20 = $8.30
- Total cost for 10,000 shares: $8.30 × 10,000 = $83,000
Outcome Scenarios
Scenario 1: NVDA Stays Below $130
Both options expire worthless.
You lose the $83,000 premium but still own NVDA.
Scenario 2: NVDA Rises Above $150
Your $130 call gains value, but your $150 call caps profits.
Max profit = ($150 - $130 - $8.30) × 10,000 = $78,000.
Best If: You are moderately bullish and want upside exposure with some hedge.
2, Bear Call Spread (Best for Income & Limited Risk)
A bear call spread is a defensive play that generates income while providing limited downside protection.
Example: Sell $140 Call, Buy $150 Call
- Sell a $140 call for $5.20
- Buy a $150 call for $1.20
- Net credit per share: $5.20 - $1.20 = $4.00
- Total credit received: $4.00 × 10,000 = $40,000
Outcome Scenarios
Scenario 1: NVDA Stays Below $140
You keep the $40,000 premium.
Stock position remains untouched.
Scenario 2: NVDA Goes Above $150
Your loss is capped at ($150 - $140 - $4.00) = $6 per share.
Max total loss: $60,000 (but the $40,000 premium offsets most of it).
Best If: You think NVDA won’t rise much past $140-$150 and want income with limited downside risk.
Comparing Strategies
| Strategy | Cost? | Protection Level | Upside Potential | Best If… |
|---|---|---|---|---|
| Protective Put ($130 put only) | $43,000 | Full protection | Unlimited | Expect big drop |
| Collar ($130 put + $150 call) | $31,000 | Moderate protection | Capped at $150 | Want low-cost insurance |
| Bull Call Spread ($130/$150) | $83,000 | ? Some protection | Limited gains | Want upside with hedge |
| Bear Call Spread ($140/$150) | - $40,000 (credit) | No real protection | Income, limited downside | Expect NVDA to stay below $140-150 |
