Bull Call Spreads
The Bull Call spread is a bullish strategy that involves the following steps:
Step 1. | Buy lower strike calls.
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Step 2. | Sell same number of higher strike calls with the same expiration date.
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The lower strike calls will be more expensive than the higher strike calls, so this will be a NET DEBIT transaction, that is, you will pay for the trade from funds out of your trading account.
Diagram 7.1. Bull Call spread.
The Bull Call spread is a lower-risk alternative to buying a straight call. Let’s compare the risk profiles of these two strategies:
| Long call | Bull Call spread | |
|---|---|---|
| Maximum risk | Call premium paid | Net debit of the spread (for ... |
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