| Position Composition | Risk Profile @ Expiration |
In this example, both contracts are ITM. They could also both be OTM, or one OTM and one ITM.
 | Short 1 call at a lower strike, Long 1 call at a higher strike.
Both contracts have the same underlying and the same expiration.
Call with the strike price nearest the stock price has the most time value. |  | Max Loss: Difference between the strike prices minus the credit received.
E.g., (36 - 35) - $0.50 = $0.50
Max Gain: Total credit received spread, which is the premium received for the short call less the premium paid for the long call
E.g., $2.50 - $2.00 = $0.50 |
| Greeks-at-a-Glance | P&L caused by movement in stock price
| Downward movement generates profits; upward generates losses. | P&L corresponding to changes in implied volatility
| If short leg has more time value, falling IV is beneficial and rising IV is detrimental. If long leg has more time value, rising IV is beneficial and falling IV is detrimental. The leg whose strike is closest to the underlying asset price will have the most time value. | Time Decay
C:RR ratio is explained in "Decision Making" | Positive C:RR when the short leg has more time value than the long. Negative C:RR otherwise. | |
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