Call and Put Spreads Explained: Profit and Hedge with BNB Options on PowerTrade
Ever wondered how to profit from market moves without taking on huge risk? Enter call spreads and put spreads — simple two-part options strategies that can boost profits and protect your portfolio. In this beginner-friendly guide, we’ll demystify call and put spreads using Binance Coin (BNB) as an example (with BNB’s price around $650), show how traders use them for profit and hedging, and walk you through placing these trades on PowerTrade’s platform. PowerTrade offers options on many altcoins (including BNB) with a wide range of expirations and strike prices, making it a great place to put these strategies into action. Let’s dive in!
What Are Call Spreads?
A call spread is an options strategy involving two call options on the same underlying asset and expiration, but different strike prices. In a typical bullish call spread (also called a bull call spread), a trader buys one call option at a lower strike price and sells another call at a higher strike price. Both calls have the same expiry date. This creates a “spread” between the two strike prices.
Traders use call spreads when they expect the underlying asset’s price to rise moderately. The bought call gives you the right to purchase BNB at the lower strike, while the sold call obligates you to sell BNB at the higher strike if exercised. The sold call generates premium that helps offset the cost of the long call, reducing the overall investment cost and risk.
How do call spreads generate profit? If BNB’s price increases as expected, the long call gains value. At expiration, if BNB is near or above the higher strike, the spread reaches its maximum value (the difference between the two strikes). The trader’s profit is this value minus the net premium paid. If BNB’s price ends up above the higher strike at expiry, the strategy achieves its max profit; if BNB’s price stays flat or falls, the spread could expire worthless and the loss is limited to the net premium paid. In short, a call spread caps your upside (because of the short call limiting gains beyond its strike) but also limits your downside to the cost paid, which is often much lower than buying a call outright or buying BNB itself.
(Note: Call spreads can be configured for bearish views too — e.g. a “bear call spread” involves selling a lower strike call and buying a higher strike call to earn premium — but for simplicity, we focus on the bullish call spread here.)
What Are Put Spreads?
A put spread is an options strategy using two put options (right to sell the asset) with the same expiration but different strikes. In a common bearish put spread (aka bear put spread), a trader buys a put option at a higher strike price and sells another put at a lower strike price simultaneously. Both puts are on the same underlying (BNB in our case) and expiration date. This strategy is used when the trader expects the asset’s price to fall moderately.
The logic is similar to the call spread: the long put will profit if BNB’s price drops, and the short put generates premium to offset part of the cost of the long put, making the position cheaper than buying a single put alone. A bear put spread maximizes profit when the underlying price declines down to or below the lower strike, and it limits losses to the net premium (debit) paid. Essentially, you’re defining a range of downside you want to profit from (between the two strikes). If BNB plummets below the lower strike, the spread still only yields the strike difference as profit — any further drop won’t increase your gain (you gave up extra downside beyond the lower strike in exchange for the lower cost). If BNB stays above the higher strike, both puts expire worthless and you just lose the small premium paid.
(Similarly, put spreads can be used in a bullish way as a credit strategy — a “bull put spread” — but that’s a more advanced income strategy. Here we’ll stick to the straightforward bear put spread for downside moves.)
Why Use Spreads? (Profit and Hedging)
Profit with limited risk: Call and put spreads let you take directional positions (bullish or bearish) on BNB with defined risk. Instead of buying BNB outright or buying a single expensive option, you pay a smaller net premium for a spread. This lower cost means lower risk — the worst-case loss is that upfront premium. For example, a bull call spread is a bullish bet on BNB with a built-in safety net: if BNB doesn’t rally, you only lose the small net premium, not a large investment. The trade-off is capped profit — you won’t get unlimited upside, only up to the difference between the two strikes (minus cost) even if BNB soars beyond your target. Many traders are happy to accept capped gains in exchange for a higher probability of profit and a limited loss. As Investopedia notes, the bull call spread’s goal is to profit from a moderate rise, reaching max profit if the underlying is near or above the short call’s strike at expiration, while any loss is limited to the net premium paid. Likewise, the bear put spread is designed to maximize profit on a moderate decline while minimizing the potential loss to the cost paid.
Hedging and protection: Spreads aren’t just for speculation — they’re also handy for hedging. If you hold BNB or are otherwise exposed to its price, you might worry about a downturn. Buying a put spread can act as an insurance policy on your BNB holdings. For instance, a vertical put spread will provide a “window of protection” on the downside. You could choose a higher strike near BNB’s current price and a lower strike at the worst-case level you want to protect against. If BNB falls into that range, the spread’s value increases, offsetting losses on your holdings between those strike prices. If BNB falls below the lower strike, the spread payout hits its max — covering losses up to that point — but any further losses aren’t covered (beyond the lower strike you’re unprotected). Still, this strategy can be much cheaper than buying a single deep put. By selling the lower strike put, you significantly reduce the hedge’s cost, making it an affordable way to get partial protection. In summary, traders and investors use spreads both to profit from expected price moves and to shield their portfolio against adverse moves in a cost-effective manner.
BNB Call Spread Example: Profiting from a Rise
Let’s put this into practice with a real-life BNB example on PowerTrade. Suppose BNB is trading at $650. You’re moderately bullish — you think BNB could rise in the next month, but maybe only to around $700 rather than skyrocketing much higher. A bull call spread is an ideal strategy here.
Setup: On PowerTrade, you find the BNB options expiring in one month. You decide to buy a $650 strike call (near-the-money) and simultaneously sell a $700 strike call. Both have the same expiration date. This creates a $50-wide call spread. Say the $650 call premium is around $30 and the $700 call premium is $18 (just as an example). By selling the $700 call, you collect ~$18, which offsets part of the $30 cost of the $650 call. Your net cost (debit) to enter the spread is $12. This $12 (per BNB, multiplied by contract size) is also your max loss — the most you can lose if BNB finishes below $650 and both options expire worthless.
Outcome scenarios:
- BNB rises above $700 at expiration: Fantastic! Both calls would be in-the-money, but effectively your long $650 call would be worth $50 more than your short $700 call. The spread pays out the difference between strikes = $50 (per BNB). You paid $12, so your profit is $38. That’s more than a 300% return on your cost. This is the maximum profit possible, and it occurs as long as BNB closes at $700 or above. (Even if BNB went to $800, your payout is still capped at $50 because the short call offsets any further gain beyond $700.)
- BNB stays around $650 (no big change): Both calls expire at or out-of-the-money. The $650 call you bought expires worthless if BNB is at or below $650, and the $700 call you sold also expires worthless (you keep the premium from it, which already went into reducing your cost). You do lose the net premium you paid ($12), but no more. This is your worst-case loss. Compared to buying a BNB outright for $650 or even buying a $650 call alone, losing just $12 is a minor hit.
- BNB rises modestly to, say, $670: Your $650 call expires in-the-money (worth $20 at expiry, since it’s $20 above the strike). The $700 call you sold expires worthless (BNB didn’t reach $700). So your spread’s value at expiry is $20. You paid $12, so you net a $8 profit. You still profit because BNB moved up into the range between your strikes. Any final price between $650 and $700 yields some profit on the spread (breakeven would be $662 in this example, i.e. strike + net cost).
Why use the spread instead of just buying the $650 call? The spread dramatically lowered your cost. The $650 call alone cost $30. With the spread, you spent $12 — that’s 60% less. Yes, you gave up any upside beyond $700, but if your target was around $700 anyway, you’re not missing out. Meanwhile, if you were wrong and BNB stayed flat or dropped, losing $12 is much better than losing the $30 premium on the lone call. This illustrates how a bull call spread lets you profit from a moderate rally with limited risk.
On PowerTrade’s platform, setting up this spread is straightforward. You can select BNB as the underlying, pick the same expiry date for both options, and choose the two strike prices ($650 and $700). The platform will calculate the net premium (debit) you pay. PowerTrade’s liquidity in BNB options means tight bid-ask spreads on these options, so you get efficient pricing on the spread trade.
BNB Put Spread Example: Hedging Against a Drop
Now say you hold a bunch of BNB, and with the price at $650, you’re worried about a potential drop in the next month. You don’t want to sell your BNB, but you want some protection. A bear put spread on BNB can provide a hedge for a specific downside range.
Setup: On PowerTrade, you look at BNB put options expiring in one month. You decide to buy a $650 strike put (which is near-the-money, providing protection starting around the current price) and sell a $600 strike put. This defines a $50 protection band. Suppose the $650 put costs $25 and the $600 put you sell gives you $10 in premium. The net cost for this spread is $15. This $15 is your maximum possible loss on the hedge (if BNB never drops below $650, the puts expire worthless and you’ve spent $15 for peace of mind). It’s much cheaper than buying a $650 put alone, which would’ve cost $25 in this example.
How the hedge works:
- BNB falls to $600 or below by expiration: Your $650 long put is in-the-money and your $600 short put is also in-the-money. At expiration, the long $650 put will be worth $50 (if BNB is at $600, it’s $50 in the money; if BNB falls even lower, the long put’s value maxes out at $50 profit above the $600 strike because the short $600 put offsets further gains beyond $600). The $600 put you sold will cost $0 to $50 to settle depending on final price (at $600 it’s worthless, below $600 it has value that negates additional gain on the long put). In effect, your spread payout is capped at $50, which you would net if BNB ends at $600 or lower. After accounting for the $15 cost, your maximum net gain is $35 from this hedge. That $35 gain per coin can offset a $50 drop in BNB’s price in that scenario — accomplishing the goal of protecting that range of losses on your BNB holdings.
- BNB dips moderately (e.g., $630 at expiry): The $650 put ends $20 in-the-money (since BNB is $20 below the strike), and the $600 put is still out-of-the-money (expires worthless). Your spread is worth $20 at expiration. You paid $15, so you gain $5 from it. That $5 offsets some of the $20 loss per BNB you experienced on the asset — not fully, but it cushions the blow. Essentially, the put spread compensates you for BNB’s decline down to $600. Anywhere below $600, you’re fully compensated up to the $50 width (after which the hedge stops providing additional benefit).
- BNB stays at $650 or rises: Both puts expire worthless. You lose the $15 premium, but your BNB assets are fine (no loss on them to hedge anyway). This is similar to paying a small insurance premium — a limited cost for protection you didn’t end up needing.
In summary, this BNB put spread gives you a safety net from $650 down to $600. It’s an example of how a vertical put spread can provide a defined band of protection. You limited your downside risk for a fraction of what a full insurance (buying a put outright) would cost. The trade-off is that if BNB crashed below $600, you would still be exposed beyond that point — but you decided that level was an acceptable risk. Such put spreads are a popular way to hedge because they lower the cost of insurance by trading away extreme-downside coverage in exchange for the premium from the short put.
Step-by-Step: How to Trade Spreads on PowerTrade
One of the advantages of PowerTrade is that it supports complex option strategies like spreads with ease. Whether you use the PowerTrade CEX (centralized exchange) or the PowerTrade DEX (decentralized platform), the process for placing a spread order is user-friendly. Here’s a step-by-step guide to executing a call or put spread on PowerTrade:
- Create an Account / Connect Wallet: Sign up for a PowerTrade account if you’re using the CEX (you can register here) or connect your crypto wallet on the PowerTrade DEX interface (link). The interface is similar in both cases, but the CEX will custody your funds while the DEX lets you trade from your own wallet. Complete any verification if required and log in.
- Deposit Funds: Ensure your account has funds to trade. On the CEX, you can deposit collateral like USDC (or other supported assets) to use for buying options. On the DEX, you’ll need sufficient stablecoins or crypto in your wallet to cover the option premiums and margin. (PowerTrade supports multiple collateral types, so you can even deposit assets like BTC or ETH to trade altcoin options, but USDC is simplest for stable pricing.)
- Navigate to BNB Options: On the trading platform, find the options marketplace and select BNB as the underlying asset. You’ll see the list of available BNB option contracts (calls and puts) sorted by expiry date and strike price. Choose the expiration date for your strategy (for example, select the monthly expiry if you plan a one-month spread).
- Select the Spread Legs: Switch to a multi-leg or strategy trading mode if available (PowerTrade offers a strategy builder/complex order interface to handle spreads). For a call spread, choose the strike price you want to buy a call and the higher strike you want to sell a call. For a put spread, choose the higher strike to buy a put and a lower strike to sell a put. For instance, for the bullish BNB spread example you would select “Buy 650 Call” and “Sell 700 Call” in the same order ticket. Make sure both legs have the same expiration date.
- Review the Order Details: The platform will calculate the net premium (debit or credit) for the combined two-leg order. In our bull call example, it might show a net cost (debit) of $12 for the spread (as we estimated). Check the quantity (usually 1 contract = 1 BNB for crypto options) and that you have sufficient balance to pay the debit (or margin for a credit spread). PowerTrade’s interface may also display useful info like the max profit, max loss, and breakeven of your multi-leg position, helping you visualize the trade’s payoff.
- Place the Spread Trade: Submit the order to buy the spread. PowerTrade will execute both legs simultaneously as one package. This is important — you don’t want to end up only buying the call and not selling the other, or vice versa. On PowerTrade, advanced order matching or an RFQ system ensures your spread is filled at the combined price you expect, so you avoid legging risk (the danger of one leg filling without the other). Once executed, you’ll see the spread position in your portfolio (likely as two option positions that form one strategy).
- Monitor and Manage: After placing the spread, you can monitor its value as BNB’s price moves. PowerTrade’s portfolio view might show your overall P/L for the combined position. As expiration nears, decide if you want to close the spread early (sell the long option and buy back the short option to lock in profit or cut loss) or hold to expiration. If the spread is in the money at expiry, note how settlement works on PowerTrade (settlement is usually in USDC since these are crypto options). The platform might automatically settle the spread’s profit/loss into your account.
That’s it! You’ve executed a multi-leg spread trade on PowerTrade. The process is designed to be quick and intuitive. Even if you’re new to multi-leg strategies, PowerTrade’s tools make it straightforward to enter positions that might seem complex at first.
Learn Options Quickly with PowerTrade’s Resources
If call and put spreads still feel a bit overwhelming, don’t worry — PowerTrade is very focused on education. The exchange provides plenty of resources to help beginners grasp options trading fast. They offer educational materials right on their website and even personalized support via channels like Telegram. For example, PowerTrade’s Strategy Explorer tool lets you visualize different option strategies (including spreads) and filter them by criteria like expiration and strikes, so you can learn by seeing how various trades would pay off. These features are designed to help traders understand and execute strategies effectively, shortening the learning curve for complex options concepts. In short, PowerTrade gives you the knowledge and the platform to confidently trade spreads and other strategies — a one-stop shop for both learning and trading.
Ready to Start Trading? Start with PowerTrade
Call and put spreads are powerful tools for any trader’s toolkit — they allow you to target profits within a range and limit your risk, or to protect your holdings against swings, all with flexibility and cost efficiency. Now that you have an understanding of how bull call spreads and bear put spreads work (and how to use them on BNB), you’re equipped to take the next step. PowerTrade makes it easy to put these ideas into practice, with an intuitive platform, deep liquidity in BNB and other altcoin options, and a wealth of educational support for beginners. Why not give it a try with a small trade and see how it works for you?
Start your options trading journey with PowerTrade today — you can sign up on the PowerTrade exchange or even trade in a decentralized way via PowerTrade DEX. With a bit of practice, you’ll quickly get the hang of call and put spreads, and you might find them to be a game-changer for your crypto trading strategy. Good luck and happy trading!
Call and Put Spreads Explained: Profit and Hedge with Options on PowerTrade was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.