The Bull Call Spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term.
Bull Call Spreads can be implemented by buying an at-the-money call option while simultaneously writing a higher striking out-of-the-money call option of the same underlying security and the same expiration month.
Buy 1 call at the lower strike price; Sell 1 call at the higher strike price. Use the same expiration date.
By shorting the out-of-the-money call, the options trader reduces the cost of establishing the bullish position but forgoes the chance of making a large profit in the event that the underlying asset price skyrockets. The Bull Call Spread option strategy is also known as the bull call Debit Spread as a debit is taken upon entering the trade.
Limited Upside profits
Maximum gain is reached for the Bull Call Spread options strategy when the stock price moves above the higher strike price of the two calls and it is equal to the difference between the strike price of the two call options minus the initial debit taken to enter the position.
The difference between the two strikes minus the net premium paid.
Limited Downside risk
The Bull Call Spread strategy will result in a loss if the stock price declines at expiration. Maximum loss cannot be more than the initial debit taken to enter the spread position.
The net premium paid.
Breakeven Point(s)
Lower strike price plus the net premium paid, when that price lies between the strikes.
Bull Call Spread Example
An options trader believes that XYZ stock trading at $42 is going to rally soon and enters a Bull Call Spread by buying a JUL 40 call for $300 and writing a JUL 45 call for $100. The net investment required to put on the spread is a debit of $200.
The stock price of XYZ begins to rise and closes at $46 on expiration date. Both options expire in-the-money with the JUL 40 call having an intrinsic value of $600 and the JUL 45 call having an intrinsic value of $100. This means that the spread is now worth $500 at expiration. Since the trader had a debit of $200 when he bought the spread, his net profit is $300.
If the price of XYZ had declined to $38 instead, both options expire worthless. The trader will lose his entire investment of $200, which is also his maximum possible loss.
These examples use standard U.S. stock options with a 100-share contract size and matching expiration dates. Related structures can use ETF, index or futures options, but contract multipliers, exercise style, settlement and the underlying price range can differ. A stock’s zero price floor must not be assumed for every futures contract.
Commissions
For ease of understanding, these examples exclude commissions, fees and financing costs. Include all costs when comparing an actual position; there is no universal commission amount.
For active traders, transaction costs can consume a significant part of returns. Compare the full commission and fee schedule, exercise and assignment charges, and bid-ask spreads. The cost of entering and closing every leg matters.
Similar Strategies
The following strategies offer related market exposure. Compare their construction, cost, maximum loss and assignment obligations; a similar outlook does not mean identical risk.
Aggressive Bull Call Spread
Changing either strike changes the entry premium, maximum profit, loss and breakeven. Widening the spread alone does not imply that a larger directional move is needed for maximum profit; the relevant short or long strike determines the expiration profit region.
Bull Spread on a Credit
The Bull Call Spread is a Debit Spread as the difference between the sale and purchase of the two options results in a net debit. For a bullish spread position that is entered with a net credit, see Bull Put Spread.
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
Before expiration and assignment
The diagrams and worked outcomes describe expiration payoffs, not an option’s market price before expiration. Time decay, implied volatility, rates, dividends and bid-ask spreads affect early closing values. American-style short options can be assigned early; a protective long option is not automatically exercised when a short leg is assigned. Closing or exercising one leg can change the remaining position’s risk.
Compare This Strategy
Optional further reading to help you compare the tradeoffs.
- Bull Call Spread vs Covered Call — Compare the amount that can be lost, whether stock ownership matters and how long the position can be held.
- Long Call vs Bull Call Spread — Start with a price target and an expiration, then compare the premium at risk.
- Bull Call Spread vs Bull Put Spread — Compare actual executable prices, fees, collateral treatment and assignment exposure.
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References: OIC options basics; OIC assignment; OCC contract adjustments. Editorial standards.