BULL CALL SPREAD

Summary

A bull call spread is a bullish options trading strategy where you simultaneously buy a call option at a lower strike price (long call) and sell a call option at a higher strike price (short call), both with the same expiration date. This creates a net debit position that profits when the underlying stock price rises moderately. The strategy has limited profit potential (capped at the difference between strike prices minus the net premium paid) and limited risk (maximum loss is the net premium paid). It's ideal when you expect moderate upward movement in the stock price.

Usage Context

Understanding bull call spreads is important when learning options strategies for directional trading, risk management, and capital-efficient ways to express bullish market views. Essential for intermediate options trading and portfolio strategy modules.

Common Confusions

• Confusing with bull put spread (which is a credit spread)
• Not understanding that selling the higher strike call limits profit potential
• Thinking this strategy works well for large stock movements
• Misunderstanding which leg to close first when exiting early
• Confusing maximum profit calculation with break-even point