Bull Call Spread Strategy
A bullish strategy that reduces cost by selling an OTM call against a long call.
Spread width - net debit paid
Net debit paid
Lower strike + net debit
bullish
📖 What is the Bull Call Spread?
A bull call spread (or call debit spread) is created by buying a call at one strike and selling a call at a higher strike with the same expiration. This reduces the cost of the trade but caps your profit potential. It's ideal when you're moderately bullish and want to lower your breakeven point compared to a long call.
🔧 How to Set Up
BUY CALL @ Lower strike (ATM or slightly OTM)
Buy to open a call at lower strike
SELL CALL @ Higher strike (OTM)
Sell to open a call at higher strike
💡 Example Trade
Underlying: NVDA @ $500
Buy 1 NVDA $500 call, Sell 1 NVDA $520 call for $8 net debit
$1,200 ($20 spread - $8 debit = $12 × 100)
$800 (net debit paid)
$508 ($500 + $8 premium)
📊 Greeks Profile
Net positive but lower than long call alone.
Net positive but reduced.
Can be neutral to slightly negative early, improves near expiration.
Reduced exposure compared to long call.
❓ Frequently Asked Questions
Bull call spread vs long call - which is better?
Bull call spreads are better when you have a moderate bullish target and want lower cost/risk. Long calls are better when you expect a large move and want unlimited upside potential.
What happens at expiration?
If stock is above the upper strike, you keep max profit. Between strikes, profit depends on stock price minus lower strike minus debit. Below lower strike, you lose the debit paid.
Pros & Cons
- ✓Lower cost than buying a call outright
- ✓Defined risk and defined reward
- ✓Lower breakeven point
- ✓Reduced impact from IV changes
- ✗Capped profit potential
- ✗Still loses from time decay
- ✗Less profit than long call if stock rallies significantly
- ✗Requires management of two legs
Ideal Conditions
- →Moderately bullish outlook
- →Want to reduce cost of bullish bet
- →Willing to cap upside for lower cost
- →IV is elevated (short call benefits from premium)
💡 Pro Tips
- Choose spread width based on your risk/reward preference
- Consider 30-45 DTE for good theta decay on short leg
- Look for spreads with at least 1:1 risk/reward ratio
- Close at 50% profit to manage risk