How to Trade Bull Spreads
To understand the simplicity and benefits of trading with Bull Spreads, here’s a short step-by-step guide.
Quick guide to Bull Spreads
Bull Spreads are short term contracts, settled on the basis of an underlying market.
When you Buy a Bull Spread contract you are taking a position that the underlying market will be higher than the current price when the contract expires. And conversely when you Sell a Bull Spread, your view is that the underlying market will be lower at the time of settlement.
Every Bull Spread contract includes a Floor and a Ceiling. These represent the minimum and maximum levels at which the contract can be settled, no matter how far past either level the underlying market may have moved. All gains/losses are therefore strictly limited.
Floor and Ceiling values only apply to settlement – they do not act as Stops or Limits and cannot trigger a position to be closed. Therefore, if a market moves against you initially and then in your favor later, you can still profit from the trade without danger of being closed out.
A typical Bull Spread contract is structured so that a 1-point (or 1-tick) movement means a $1
profit or loss per contract.
The Bull Spread contract closes either because it has reached its designated expiry time, or because you have chosen to close it before expiry. You can enter an order to close, or partially close, your position at any time until expiry. To do so, click on your position in the 'Open Positions' window and place an opposite order in the order ticket. So if you opened by buying a contract, you close the position by selling. Join Nadex to experience Bull Spreads for yourself.
For technical information about Bull Spreads settlements and expirations on the Nadex exchange, please see Bull Spread Contracts, or view our Examples to see how Bull Spreads work in practice. If you want to jump to learning about advanced strategies you can use to trade Bull Spreads, visit the Nadex Academy.
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