In this case, instead of making a loss when the price of the underlying stock remain stagnant or rises, it will make a very small profit and make a big profit if the price falls strongly, resulting in the risk graph below. A bull call spread is an options strategy designed to benefit from a stock's limited increase in price. The strategy limits the losses of owning a stock, but also caps the gains. This strategy is a limited risk and limited profit strategy. Call-SpreadOverlay: Incorporating theEﬀects of Convertible Arbitrage Samira Shirgir A Thesis In The Department of Mathematics and Statistics Presented in Partial Fulﬁlment of the Requirements ... discounted at the risk-free rate plus a credit spread which is the extra yield that the ITM is 'In the money' and OTM is 'Out of the money'. Short Call Butterfly Box Spread (Arbitrage) About Strategy: Short Call Butterfly (or Short Butterfly) is a neutral strategy similar to Long Butterfly but bullish on the volatility. This is known as a multi-leg order. Fixed-Income Arbitrage: An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. Let's take a look at what could go right, or wrong, with this strategy: Example 1: The underlying stock, XYZ, rises … When using a fixed-income arbitrage … The book Advanced Equity Derivatives Volatility and Correlation page 22 said. Call Spread meaning 2 calls, one ITM and one OTM. Deep ITM Bear Call Spread Arbitrage Deep ITM Bear Call Spread can become an arbitrage position with no possibility of loss. It is a strategy in which you own shares of a company and Sell OTM Call Option of the company in similar proportion. Covered Call Box Spread (Arbitrage) About Strategy: A Covered Call is a basic option trading strategy frequently used by traders to protect their huge share holdings. To preclude arbitrage we must at least require: No call or put spread arbitrage : $\dfrac{\partial c}{\partial K}\leq 0,\ \dfrac{\partial p}{\partial K}\geq 0.$ Put Spread meaning 2 puts, one ITM and one OTM. Arbitrage strategy is a way to earn small profits with very little or zero risk. Note: A bull call spread can be executed as a single trade. For Nifty Spot Price at 10550, the 10400 Call Option is ITM and 10700 Call is OTM. For more information, contact your Fidelity representative.