This segment of Market Measures takes a look at a strategy that is essentially a combination of a call spread and short put.
We call this strategy a financed call spread because we are financing the debit of the call spread with the credit from a short put.
The financed call spread has undefined risk on the downside and is a bullish strategy.
Our study compares the trade to a 35 delta put, and the results show that the strategy has a higher average P/L but has greater risk than a 35 delta put. Overall, the strategy performs great in a bull market, but has greater risk when there is a market downturn.