Market Measures

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Financed Call Spread Part 2

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

This segment of Market Measures dissects the financed call spread which is a combination of a short put and long call spread.

Since the strategy is just a combination of simpler strategies, we decided to take a look at the short put and long call spread performance separately. The results show that a majority of the P/L comes from the short put, and the short put performs better in market downturns.

Trading the short put instead of the financed call spread makes more sense since the short put has a higher win rate, great profitability, and lower volatility compared to the financed call spread.

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