1. What it is
Sell one lower-strike call and buy one call at each of two higher strikes, all at the same expiration.
2. Why use it
Sell a lower call and buy two higher calls, creating a loss valley before upside participation.
3. How the numbers work
View example
- Sell 1 × Call · Strike 100
- Buy 1 × Call · Strike 105
- Buy 1 × Call · Strike 110
All option legs have the same expiration.
- Option premium received
- 1
- Expiration breakeven
- 101 / 114
- Maximum expiration profit
- Theoretically unlimited
- Maximum expiration loss
- 4
- Underlying at expiration 100 → Profit 1
- Underlying at expiration 110 → Loss 4
4. How it changes
The position can begin with bearish exposure and become bullish on a large rally. Gamma and vega depend on the relative weights of the three strikes.
5. What to watch for
The central valley is the main expiration loss. The initial credit, if any, protects the quiet downside but not the region between the long strikes.
The name describes the initial setup, not all outcomes. Both a quiet market and a sufficiently large rally can outperform a moderate rise.
Examples use illustrative entry prices and amounts per underlying unit, before costs. Contract amounts require the contract multiplier. Expiration payoffs assume the illustrated legs remain intact; earlier position values and exercise or assignment outcomes can differ.