The bull call spread
The bull call spread is a defined-risk way to bet on a rise. You buy a call and sell a higher-strike call against it. Selling the upper call cuts your cost — and caps your gain. You give up the unlimited upside of a lone call in exchange for a cheaper trade with a known maximum loss.
How it is built
Two calls, same expiration: buy the lower strike, sell the higher. Stock at $100: buy the $100 call for $5, sell the $110 call for $2, net debit $3. That $3 is the most you can lose. If the stock climbs to $110 or higher, the spread is worth its full $10 width — a $7 profit. Between $103 (breakeven) and $110 you make a partial gain.
| Outlook | Moderately bullish |
|---|---|
| Max profit | (Strike width − net debit) = $7/share at or above $110 |
| Max loss | Net debit = $3/share, at or below $100 |
| Breakeven | Lower strike + net debit = $103 |
| Time decay (theta) | Mixed — long and short calls partly offset decay |
A lone $100 call costs $5 and needs the stock above $105 just to break even. The spread costs only $3 and breaks even at $103, because the $2 you collected on the short call lowered your cost. The trade-off: your gains stop at $110. If you expect a move to a level rather than a moonshot, paying less and capping there is the better risk-adjusted bet. You’re also less exposed to a volatility crush, since the short call offsets some vega.
When to use it
Use a bull call spread when you’re moderately bullish with a target in mind, and want defined risk. It is especially attractive when implied volatility is high: the short call recovers some of the inflated premium you’re paying on the long call, softening the vega risk that hurts a plain long call.
Common pitfalls
Setting strikes too far apart. A wide spread behaves almost like a lone call — more cost, more risk — defeating the purpose of capping.
Forgetting it’s a defined maximum, reached only at expiration. Before expiry, the spread rarely shows its full value even if the stock is above the upper strike.
What to do with this
A bull call spread is a targeted bullish bet: cheaper than a call, with both profit and loss known in advance. Its bearish twin, built from puts, is next.
The bearish mirror is the bear put spread — defined-risk downside for a debit.
Next lesson · continue the courseOn to the bear put spread →