Bull Call Spread
Buy lower call, sell higher call
What is Bull Call Spread?
Bull Call Spread A bull call spread is a bullish options strategy where you simultaneously buy a call option at a lower strike price and sell a call option at a higher strike price, both with the same expiration date. Also called a call debit spread, this strategy provides defined-risk bullish exposure at a lower cost than buying a call outright. How it works: The long call gives you the right to buy shares at the lower strike, while the short call obligates you to sell shares at the higher strike. The net premium paid (debit) is your maximum loss, and the maximum profit is the difference between the two strikes minus the net debit. The position profits when the underlying stock rises above the lower strike by more than the premium paid, and reaches maximum profit when the stock is at or above the upper strike at expiration. For example, with AAPL trading at $190, you buy the $190 call for $6.50 and sell the $195 call for $4.00. Your net debit is $2.50 per share ($250 per contract). Your maximum profit is $5.00 - $2.50 = $2.50 per share ($250), achieved if AAPL is at or above $195 at expiration. Your breakeven is $192.50 ($190 strike + $2.50 debit). If AAPL closes below $190, both options expire worthless and you lose your full $250 investment. Traders choose bull call spreads over outright long calls when they want to reduce cost and have a defined profit target. The short call subsidizes the purchase of the long call, lowering the breakeven point. This strategy works best in moderately bullish scenarios where you expect the stock to rise to or slightly above the short strike by expiration. The tradeoff is that your upside is capped at the short strike.
Complete Definition
A bull call spread is a bullish options strategy where you simultaneously buy a call option at a lower strike price and sell a call option at a higher strike price, both with the same expiration date. Also called a call debit spread, this strategy provides defined-risk bullish exposure at a lower cost than buying a call outright. How it works: The long call gives you the right to buy shares at the lower strike, while the short call obligates you to sell shares at the higher strike. The net premium paid (debit) is your maximum loss, and the maximum profit is the difference between the two strikes minus the net debit. The position profits when the underlying stock rises above the lower strike by more than the premium paid, and reaches maximum profit when the stock is at or above the upper strike at expiration. For example, with AAPL trading at $190, you buy the $190 call for $6.50 and sell the $195 call for $4.00. Your net debit is $2.50 per share ($250 per contract). Your maximum profit is $5.00 - $2.50 = $2.50 per share ($250), achieved if AAPL is at or above $195 at expiration. Your breakeven is $192.50 ($190 strike + $2.50 debit). If AAPL closes below $190, both options expire worthless and you lose your full $250 investment. Traders choose bull call spreads over outright long calls when they want to reduce cost and have a defined profit target. The short call subsidizes the purchase of the long call, lowering the breakeven point. This strategy works best in moderately bullish scenarios where you expect the stock to rise to or slightly above the short strike by expiration. The tradeoff is that your upside is capped at the short strike.
Related Terms
Frequently Asked Questions
What is a bull call spread and when should I use one?
A bull call spread involves buying a lower strike call and selling a higher strike call with the same expiration. Use it when you are moderately bullish on a stock and want defined-risk exposure at a lower cost than buying a call outright. It works best when you have a specific price target near the short strike.
How do you calculate max profit on a bull call spread?
Maximum profit equals the width of the strikes minus the net debit paid. For example, if you buy the $100 call and sell the $105 call for a net debit of $2.00, your max profit is $5.00 - $2.00 = $3.00 per share ($300 per contract), achieved when the stock closes at or above $105 at expiration.
What is the breakeven on a bull call spread?
The breakeven point is the lower strike price plus the net debit paid. For a $100/$105 bull call spread purchased for $2.00 net debit, the breakeven is $102.00. The stock must rise above this price by expiration for the trade to be profitable.
Want to Learn More?
Explore our educational resources and analytics tools to deepen your understanding.