Options Wonderland

[leemalone2k3]

That type of trade is called a vertical credit spread. It is a directional option trade with a little bit of protection where you buy a call and sell a call with the same expiration but different strike prices. You bring in a credit when you enter the trade and if the stock stays below the short options on expriation(the 40 calls you sell) you keep the credit.

What I meant by buying the 41 calls and selling the 40 calls is that you buy the Nov 41 calls and sell short the Nov 40 calls for a credit into your account.

Read this link, it explains the mechanics of vertical credit spreads.

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=27853473