Bull Call Spread
A bull call spread buys a call and sells a higher-strike call against it, cutting the cost of the bullish bet in exchange for capping the payoff. It's the cost-conscious version of a long call.
When it makes sense
- You expect a move up to (but not necessarily beyond) a specific level
- Implied volatility is high enough that outright calls feel expensive
- You want a better breakeven than a naked long call
How it works
Buy a call, sell a higher-strike call in the same expiration. Your net debit is the max loss. Max profit is the strike width minus the debit, reached when the stock closes at or above the short strike.
Risk & reward
Defined on both sides. The short call finances the long one — you give up unlimited upside for a lower cost and closer breakeven. Time decay hurts less than a naked call, especially when the spread is centered near the money.
Worked example
Stock at $60. Buy the 45-day $60 call, sell the $65 call, for a $1.90 debit ($190). Stock at or above $65 at expiration: spread is worth $500 — a $310 profit (163% return). Below $60: lose the $190.
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