Hedging an open bull vertical

The opening vertical is already hedged

A bull vertical is a defined-risk directional structure opened by buying a call spread or by selling a put spread. Both constructions begin as hedged positions rather than single-leg directional options.

Relative to an outright long call at the purchased vertical strike, or to selling the same-strike put, the vertical reduces both vega and theta exposure. Vega is how much the position value changes when implied volatility changes. Theta is how much the position value changes as time passes.

Directional exposure is smaller than in the unhedged alternative but remains the main source of the spread's profit potential. That leftover directional sensitivity of the spread to the underlying shares is its delta exposure.

Cut leftover risk by size

After an unrealized gain appears, leftover risk can be reduced by closing part of the position when more than one contract is open.

A partial close is presented as appropriate when the original share outlook is unchanged and the remaining spread still has room to expand before its defined maximum.

Cut leftover risk by width

Tightening or rolling strikes is another listed adjustment when a gain has already appeared and unused strikes sit between the purchased and sold options. Strike tightening is an after-entry change that shortens the gap between the purchased and sold strikes.

Narrowing the remaining vertical reduces risk while keeping delta exposure and a bullish bias set by the position's location and width versus the shares.

Pair an opposing vertical

A long butterfly or long condor built entirely of calls or entirely of puts is listed as a further hedge, typically by selling a bear call vertical or buying a bear put vertical against the original bull spread.

A long butterfly is a multi-strike hedge made by pairing the original bull vertical with an opposing vertical using only calls or only puts. A long condor is a wider multi-strike hedge built the same way, again using only calls or only puts.