squirrel in my pants 樓主 fearless Monkey_8203 : This strategy is typically used when the price of the underlying asset is expected to decline, but the drop is limited.
If NVIDIA's stock price falls to $148 or lower, the strategy will achieve maximum profit because both options will expire worthless, and the investor earns the difference in option premiums received when opening the position. Therefore, the maximum profit = $1.866 million minus $1.566 million = $300,000.
However, if the stock price rises above $150, the investor will face the maximum loss because both options are in-the-money. The call with a strike price of $148 will be exercised: this means an obligation to sell 100 shares of NVIDIA at $148. The call with a strike price of $150 will be exercised by the investor: this means they have the right to buy 100 shares of NVIDIA at $150.
However, since an option premium of $0.5 per share was received when opening the position, the investor's maximum loss is $150 - $148 + $0.5 = -$1.5/share * 600 * 100 = $90,000.
Learn more:Bear Call Spread.

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