Bull Call Spread Strategy
Buy a lower strike call, sell a higher strike call. Defined-risk bullish trade.
What is a Bull Call Spread?
A Bull Call Spread (debit spread) involves buying one call and selling a higher-strike call with the same expiration. Caps your max profit but reduces cost vs buying a long call outright. Ideal when you're moderately bullish and want cheaper exposure than a naked long call.
When to Use a Bull Call Spread
Use when moderately bullish on a stock and want to reduce cost. Best when IV is high (sold call offsets elevated IV). Works well for directional plays with defined upside target.
Key Formulas
- Max Profit
- (Width of spread - Net debit) × lot size
- Max Loss
- Net debit × lot size
- Breakeven
- Lower strike + Net debit
Example Trades
Buy AAPL $190 Call for $5, Sell $195 Call for $3. Net debit $2. Max profit $300 (at $195+). Max loss $200.
Buy NIFTY 22500 Call for ₹200, Sell 22600 Call for ₹150. Net debit ₹50 → ₹3,250 (× 65). Max profit ₹3,250 above 22600. Max loss ₹3,250.
Common Mistakes to Avoid
- Strikes too far apart (more cost, same risk)
- Not rolling up short strike as stock rises
- Closing too early when profit target hit
- Ignoring bid/ask spreads on both legs
Related Strategies
Bull Call Spread FAQ
What is a Bull Call Spread?
A Bull Call Spread (debit spread) involves buying one call and selling a higher-strike call with the same expiration. Caps your max profit but reduces cost vs buying a long call outright. Ideal when you're moderately bullish and want cheaper exposure than a naked long call.
When should I use a Bull Call Spread?
Use when moderately bullish on a stock and want to reduce cost. Best when IV is high (sold call offsets elevated IV). Works well for directional plays with defined upside target.
What is the maximum profit and loss for a Bull Call Spread?
Max profit: (Width of spread - Net debit) × lot size. Max loss: Net debit × lot size.
What is the breakeven price for a Bull Call Spread?
Breakeven: Lower strike + Net debit. US example: Buy AAPL $190 Call for $5, Sell $195 Call for $3. Net debit $2. Max profit $300 (at $195+). Max loss $200. Indian-index example: Buy NIFTY 22500 Call for ₹200, Sell 22600 Call for ₹150. Net debit ₹50 → ₹3,250 (× 65). Max profit ₹3,250 above 22600. Max loss ₹3,250.
What are common mistakes when trading a Bull Call Spread?
Common mistakes include: Strikes too far apart (more cost, same risk); Not rolling up short strike as stock rises; Closing too early when profit target hit; Ignoring bid/ask spreads on both legs.
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