Explain, for bull and bear spreads, straddles and collars, the objective, structure, payoffs, risks, value and profit at expiry, maximum gain and loss, and the underlying price at which each breaks even
The idea
A bull call spread buys a call at strike XL and writes one at a higher XH: maximum profit XH − XL − net premium, maximum loss the net premium, breakeven XL + net premium, a cheap way to back a moderate rise. A bear put spread buys the higher-strike put and writes the lower: same maximum profit and loss, breakeven XH − net premium. A long straddle buys a call and a put at one strike to bet on volatility, not direction: loss capped at the total premium, unlimited gain, breakevens at X ± total premium. A collar adds a long put and a short call to a long asset, fixing value between the strikes. At zero cost the call funds the put. Spreads and collars cap upside; straddles bleed time value.
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