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Seasoned VeteransModerately Bullish
Christmas Tree (Calls)
Overview
An unbalanced spread using three different strikes. Named for its payoff diagram shape resembling a Christmas tree. Creates a directional position with premium income.
Max Profit
Variable — best at first short strike
Max Loss
Unlimited above highest strike if not properly hedged
Breakeven
Varies
Structure
Long 1 ATM Call + Short 1 OTM Call + Short 1 further OTM Call (unbalanced)
Risk Profile
Variable profit and risk. Directional bias. Requires more active management.
When to Use
When you have a moderate directional view and want to reduce cost. More advanced — requires careful management due to unbalanced nature.