Which option strategy is the combination of a long call with a low exercise price and a short call with a high exercise price?

Question

Quizplus · Accepted Answer

This is a bull spread strategy, also known as a call debit spread. The underlying assumption is that the stock price will go up, but the investor wants to limit their potential losses by simultaneously buying a low exercise price call option and selling a high exercise price call option. This creates a net debit, but also limits the maximum potential loss while still allowing for potential profit if the stock price increases. Option A (buy and write) involves buying the underlying stock and simultaneously writing a call option, while option C (bear spread) involves selling a low exercise price call option and buying a high exercise price call option to profit from a potential drop in stock price. Option D (long straddle) involves buying both a call and a put option at the same exercise price and expiration date, and option E (short straddle) involves selling both a call and a put option at the same exercise price and expiration date.

Which Option Strategy Is the Combination of a Long Call