For most part it should be self explanatory. This is the performance impact for the stock price move for a Bull call spread taking google as an example. The total capital allocated in the portfolio is $59,400. If one wants to look at a different portfolio one could just use the P/L information which is based on one contract.
| Portfolio Market Value | $59,400 | | |
Type | Call | Call | |
| Expiry | 12/17/2010 | 1/21/2011 | |
| Time to Maturity (Years) | 0.02 | 0.12 | |
| Risk free rate | 0.13% | 0.13% | |
| Volatility | 28% | 28% | |
| Dividend Yield | 0% | 0% | |
| Strike | 600 | 600 | |
The payoff function is based on entry price of 13.2 for the long call, and 4.0 for short call.
Now let's see how this could turn into a black swan. Suppose we get a little greedy and sell one day call at strike 600. What's the probability of Google jumping $10 in one day? If it doesn't happen we get to keep $69 on one contract. If it does here's how it looks. A good 10% of the portfolio is wiped out if Google jumps to $646 by Friday morning... Given all the info about Gingerbread, chrome OS that is already out there is this likely?
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