Call-spread bound
Definition · Level 11 · Pricing toolkit
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A call spread can never be worth more than the strike gap discounted to today, e^(−rT) × (K₂ − K₁), nor less than zero: call prices fall with the strike, but no faster than the gap.
Example
90/100 calls at 21.00 and 9.50: the spread costs 11.50 but pays at most 10, so sell it.
Where Tradecraft teaches it
Level 11 · Pricing toolkit, in the lesson “Across strikes: spreads, butterflies & the sign table”: Call prices must fall with the strike, no faster than the strike gap, and bend upward; plus how each input moves a call and a put.
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