I'm looking at different option strategies and the ways that their payoffs differ (and therefore how they can differently be used).
I'm looking at the long seagull (buy a call spread and sell a put), and wondering if taking the opposite positions in these would provide an unlimited payoff with decreasing strike and a limited loss with increasing strike?
As an example:
- Buy a put with strike 1.2
- Sell a call with strike 1.3
- Buy a call with strike 1.4
Should the two calls not cancel once the strike hits 1.4 and therefore this is your maximum loss? Whilst a strike 1.2 and below will result in a profit (ignoring premiums)?