Bull Call Spread

What is a Bull Call Spread?

A bull call spread is a two-leg bullish options trade. You buy a call at one strike and simultaneously sell a call at a higher strike, both with the same expiration. The sold call reduces your cost but also caps your maximum profit.

This is a debit spread, meaning you pay money to enter the trade. The trade-off is straightforward: you spend less than a naked long call, but you give up the unlimited upside. For moderately bullish outlooks, this is often a smarter trade than buying a call outright.

How to Set It Up

Buy 1 call at the lower strike price
Sell 1 call at the higher strike price
Same expiration date for both legs
Strike selection: The width between strikes determines your max profit and max loss. Wider spreads cost more but have more profit potential. A $5-wide spread (buy $100 call, sell $105 call) is a common setup.
Expiration: 30-60 days out. You want enough time for the stock to make its move, but not so much that you are paying for time value you do not need.

The net debit is the difference between what you pay for the long call and what you receive for the short call.

When to Use This Strategy

Use a bull call spread when:

You are moderately bullish, not wildly bullish
You want to reduce the cost of a long call
Implied volatility is elevated (the sold call helps offset the inflated premiums)
You want defined risk and defined reward with no surprises

This is not the right trade if you expect a massive move. If you think the stock is going to explode higher, a straight long call lets you capture all of that upside. The spread caps you.

Example Trade

Stock XYZ is trading at $100. You think it will go to $107 in the next 45 days.

Buy 1 XYZ $100 call for $4.00
Sell 1 XYZ $105 call for $2.00
Net debit: $4.00 - $2.00 = $2.00 ($200 total)
Max profit: ($105 - $100 - $2.00) x 100 = $300
Max loss: $2.00 x 100 = $200
Breakeven: $100 + $2.00 = $102

If XYZ is at $107 at expiration, both calls are ITM. Your long call is worth $7, your short call obligation is $2. Net value is $5 minus your $2 cost = $300 profit. That is a 150% return on risk.

If XYZ stays at $100, both calls expire worthless. You lose your $200.

Risk and Reward

Max profit: (Width of strikes - net debit) x 100. In our example, $300. This happens when the stock is at or above the short strike at expiration.
Max loss: The net debit you paid. $200. This happens when the stock is at or below the long strike at expiration.
Breakeven: Long strike + net debit. $102.

The risk-to-reward ratio here is $200 risk for $300 reward, which is 1:1.5. That is a reasonable setup. You can adjust the strikes to change this ratio.

Tips and Common Mistakes

Do not make the spread too wide. A $20-wide spread might look appealing for the profit potential, but you are paying more and the probability of the stock reaching the short strike drops significantly.
Close the trade before expiration. If the stock is between your strikes near expiration, you can get caught in assignment risk. Close for a profit when you have 50-75% of max profit.
Do not let a small loss turn into a max loss. If the trade is going against you early, it is okay to close at a partial loss rather than waiting for expiration and losing everything.
Watch for ex-dividend dates. If the stock pays a dividend, your short call might get assigned early. This is rare but worth knowing about.

Related Strategies

Bull Put Spread — a credit spread version of a bullish trade, same risk profile but you collect premium instead of paying it
Long Call — if you want unlimited upside and are willing to pay more
Bear Call Spread — the bearish mirror image of this strategy