Question 1

What is a Call Backspread?

Accepted Answer

You sell (short) one ATM Call and buy (long) at least two OTM Calls

Question 2

What is the max loss of a Call Backspread?

Accepted Answer

The max loss is Width of the spread minus a debit paid or plus a credit received.

Question 3

When do I breakeven when utilizing a Call Backspread strategy?

Accepted Answer

The breakeven is defined as For a 1xN Call Backspread: (Width of Spread / (N-1)) + Strike Price of Long Calls +/- Debit Paid/Credit Received.

Question 4

What is the typical application of a Call Backspread?

Accepted Answer

The typical applicatio is: 1. Speculate on a large increase in price and increasing volatility.