Strategy guide
Bull Call Spread Strategy
A bull call spread buys a lower-strike call and sells a higher-strike call, for a net debit.
Strategy summary
- Market outlook
- moderately bullish, strong bullish
- Risk type
- defined
- Capital requirement
- Net debit × 100 per spread
- Maximum profit
- Width minus debit
- Maximum loss
- Net debit paid
- Theta / vega
- mixed / mixed
- Assignment risk
- low
- Typical use
- Directional upside with a defined, lower cost than a long call
Payoff at expiration
- Max profit$760.00
- Max loss-$240.00
- Breakeven$102.40
How Bull call works
Selling the higher call offsets part of the cost of the long call while defining both the cost and the maximum profit.
Exact option legs
Buy lower-strike call + sell higher-strike call
- BUY 1 × $100.00 call expiring 2026-01-16 at $4.00
- SELL 1 × $110.00 call expiring 2026-01-16 at $1.60
Payoff, breakeven and risk
At expiration the position is worth the intrinsic value of each leg. The maximum profit is $760.00, the maximum loss is -$240.00, and the position breaks even at $102.40.
Worked example
With the underlying at $100.00:
- The spread costs a net debit of 2.40 for a $10-wide structure.
- Maximum loss is $240 and maximum profit is $760 above 110.
- Breakeven is 102.40.
Strike selection
The long strike sets where the position turns bullish; the short strike caps the reward. Wider spreads cost more and pay more.
Expiration selection
Give the thesis enough time to play out; short expirations can expire worthless even when direction is right.
Effect of time decay
This structure is mixed on theta: time decay affects the legs differently.
Effect of implied volatility
It is mixed on vega: the legs respond differently to volatility changes.
Effect of stock movement
The position suits a moderately bullish or strong bullish view, and it is tested most when the underlying moves outside the modelled strikes.
Assignment considerations
Assignment risk is low. Short legs can be assigned, especially when they are in the money or before a dividend; long legs have no obligation but can be exercised.
When it works poorly
- Range-bound markets where the stock never reaches the long strike.
- High implied volatility that inflates the debit.
- Very short expirations.
Common mistakes
- Paying too much for a narrow spread so the return on risk is poor.
- Holding to expiration when the short strike is near the money.
- Ignoring volatility when the debit is set.
Tax caveat
Option outcomes can receive different tax treatment from share trades, and assignment changes the holding period and cost basis. This is general information, not tax advice; confirm your situation with a qualified professional.
FAQ
- What is the maximum profit?
- The width between strikes minus the net debit.
- What is the maximum loss?
- The net debit paid.
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Delta estimates how much an option's price changes for a one-dollar move in the underlying, and is often used as a rough probability proxy.
Read guide Related conceptimplied-volatility
Related concept guide.
Read guide Related conceptOptions Theta
Theta estimates how much value an option loses per day from the passage of time, all else equal.
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