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Bull Call Spread

Buy a lower-strike call and sell a higher-strike call. Cheaper than a long call, but profit is capped.

New to this? A spread combines two options. Here you buy one call and sell a higher-strike call, which lowers the cost but caps the profit. Unfamiliar word? See the options glossary.

Payoff at expiration

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When traders use it

Moderately bullish with a price target near the short strike.

Formulas (per share; ×100 per contract)

Max profit	(K2 − K1) − net debit
Max loss	Net debit (C1 − C2)
Breakeven	K1 + net debit

Key risks

Capped upside; can lose the full debit; early assignment on the short call.

How it works

You buy a call at a lower strike and sell a call at a higher strike, same expiration. The sold call reduces your cost but caps profit. Your net debit is the most you can lose; the max value of the spread is the strike difference.

Worked example HYPOTHETICAL

Hypothetical example only — not real prices or a recommendation. Stock at $100. Buy the $100 call for $4.00, sell the $110 call for $1.50. Net debit $2.50 ($250).

Stock price at expiration	P/L (1 contract, excl. fees)
$90	−$250
$100	−$250
$102.5	$0
$105	+$250
$110	+$750
$120	+$750

Market outlook: when to use it

Use when: Moderately bullish with a target around the short strike; want cheaper exposure than a long call.

Avoid when: You expect an explosive move far beyond the short strike, or the spread costs close to its width (poor risk/reward).

The Greeks, in plain words

Delta	Positive, smaller than a long call.
Theta	Mixed: negative below/near the long strike, positive once the stock is near or above the short strike.
Vega	Small; the two legs mostly offset.
Gamma	Small; dampened by the short call.

Choosing strikes and expiration

A common approach: long strike at or slightly ITM, short strike at your price target. Aim to pay no more than ~half the width. 30–60 days.

Managing the trade

Close at 50–80% of max value rather than waiting for expiration. If the short call is ITM near expiration, close the whole spread to avoid assignment and pin risk. Early assignment of the short call (esp. before ex-dividend) can leave you short stock; your long call still covers it.

Common mistakes

Letting the spread expire with the stock between strikes (partial exercise mess).
Paying too large a debit.

FAQ

Max profit?
Width − debit = $10 − $2.50 = $7.50 ($750).

Why not just buy the call?
Lower cost and less theta/vega risk, at the price of capped upside.

Explained simply

When would someone use this?

When you expect a moderate rise and want a cheaper trade than a plain long call.

The setup, in plain words

Buy a call at a lower strike and sell a call at a higher strike, same expiration. The call you sell pays for part of the one you buy.

Max profit, max loss and breakeven

Max profit: (Higher strike − lower strike − net debit) × 100.
Max loss: The net debit paid.
Breakeven: Lower strike + net debit.

A simple numeric example (hypothetical)

Stock at $100. Buy the $100 call for $3 and sell the $110 call for $1: net cost $2 ($200). Stock at $110 or higher at expiration: profit $800. Stock at $102: breakeven. Stock at $100 or lower: loss $200.

The main risks, in plain words