Bull Call Spreads
The Bull Call spread is a bullish strategy that involves the following steps:
Buy lower strike calls.
Sell same number of higher strike calls with the same expiration date.
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 ...|