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Seagull

You want to bet on direction. A call spread costs money. A risk reversal gives you unlimited downside. The seagull splits the difference: a call spread financed by a short put. Cheap entry. Capped upside. Downside risk below the put.

In FX desks, seagulls are bread and butter. Corporate treasurers use them to hedge currency exposure at near-zero cost. In crypto, they're the structure you reach for when you want directional exposure but IV is too high to justify buying a naked call.

What You Do (Bullish Seagull)​

The Setup
Buy1 OTM call at K1
Sell1 further OTM call at K2 (caps upside)
Sell1 OTM put at K3 (finances the spread)
Max Profit
K2 - K1 (capped)
Upside Risk
None
Downside Risk
Below put strike
Cost
Low or zero

Worked Example​

BTC at 94,800. You're bullish over the next 30 days but IV is at 68% and you don't want to pay 3,450 for an ATM call.

Buy the 98k 30-day call for 2,180. Sell the 106k 30-day call for 780. Sell the 87k 30-day put for 1,450.

Net cost: 2,180 - 780 - 1,450 = -50 (small credit).

  • BTC at 94,800 at expiry: everything expires worthless. You keep 50. A free trade that went nowhere.
  • BTC at 103,000: long call is 5,000 ITM. Short call worthless. Profit: 5,000 + 50 credit = 5,050.
  • BTC at 110,000: long call 12,000 ITM, short call 4,000 ITM against you. Profit capped at 8,000 + 50 = 8,050. (That's K2 - K1 = 106k - 98k.)
  • BTC at 83,000: put is 4,000 ITM against you. Loss: 4,000 - 50 credit = 3,950.
  • BTC at 75,000: put is 12,000 ITM against you. Loss: 12,000 - 50 = 11,950. The naked put is real.
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A seagull is a risk reversal with a cap. A risk reversal (sell put, buy call) gives unlimited upside but unlimited downside. A seagull (sell put, buy call spread) caps the upside but also defines how far the market needs to move for you to reach max profit. It's a more conservative directional trade. You're trading upside convexity for lower cost.

How the P&L Works​

  1. Below the short put. The put goes ITM against you. Losses grow like being short spot from the put strike. No floor.
  2. Between put and long call. Everything is OTM. If zero-cost, P&L is flat at zero. Dead zone.
  3. Between the two calls. The long call gains value. Profit grows linearly.
  4. Above the short call. Gains are capped at K2 - K1. The short call offsets further upside.
Spot at Expiry$100k
$70k$130k
Net Cost$0k
$0k$3k
BE $90k$0+$10k-$20k$70kK1 $90kK2 $100kK3 $110k$130kSpot Price at ExpiryP&L
Settlement
$100k
P&L
+0.0k
Max Loss
Substantial
Max Gain
+$10k

When to Use​

  • You're moderately bullish and want upside participation within a range
  • IV is elevated and you don't want to pay full freight for a directional call
  • You're comfortable with downside exposure below the put strike (this is a naked short put
  • Common in hedging programs where cost needs to stay near zero (corporate treasuries, fund overlays)

Common Mistakes​

Common Mistakes
The mistakeTreating the seagull as 'free money' because it costs nothing to enter. "Zero cost means zero risk, right?"
The realityThe short put is a naked short put. In a crash, your downside is substantial and unbounded to zero. The 'zero cost' means you financed the call spread by taking on downside risk. You didn't eliminate cost. You relocated it.
The mistakeSetting the put strike too close to spot to maximize the credit. The \$91k put pays more than the \$87k put, so you sell it.
The realityA 3% OTM put on BTC gets tested every other week. A 8% OTM put gives you room to breathe. The extra \$400 in credit isn't worth being ITM on a routine pullback. Set the put where you'd actually be comfortable owning the underlying.

Greeks at a Glance​

Greek
Sign
Plain English
Delta
+
Net bullish (short put + long call spread). More delta than a call spread alone.
Gamma
+/-
Mixed. Depends on where spot sits relative to strikes.
Theta
~0
Long and short legs roughly offset. Near zero at entry.
Vega
~0
Mixed vega exposure. Roughly flat because you're long and short options in similar amounts.

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