Bull Call Spread
A bull call spread is a bullish options strategy that involves buying a call at a lower strike price and selling a call at a higher strike price with the same expiration, creating a net debit position that profits when the underlying stock rises moderately.
The bull call spread is one of the most widely used directional options strategies among retail traders in the U.S. market. By combining a long call at a lower strike with a short call at a higher strike — both with the same expiration date — the trader creates a position that benefits from an upward move in the underlying stock while capping both the maximum gain and maximum loss.
Consider a trader who is moderately bullish on Apple (AAPL) trading at $175. They might buy the $175 call for $4.00 and sell the $185 call for $1.50, paying a net debit of $2.50. The maximum profit on this spread is $7.50 (the $10 spread width minus the $2.50 debit) and is achieved if AAPL closes at or above $185 at expiration. The maximum loss is $2.50 — the entire net debit — and occurs if AAPL closes at or below $175 at expiration. The breakeven price is $177.50.
The bull call spread is preferred over a simple long call in environments where implied volatility is elevated. Because the sold call offsets some of the vega exposure of the purchased call, the spread is less sensitive to IV changes. This makes it particularly useful when entering a trade before a catalyst — such as earnings — when single long options can be expensive due to inflated premiums.
Time decay (theta) works against the bull call spread when the stock has not yet moved toward the upper strike. The sold call decays faster on a percentage basis when it is closer to at-the-money, but the net effect on the spread depends on how the underlying is positioned relative to the strikes. Generally, traders prefer to hold bull call spreads with sufficient time remaining and let price action carry the position to profitability.
The CBOE offers standardized equity options contracts that represent 100 shares per contract, meaning the dollar values cited above are multiplied by 100. The OCC guarantees both legs of the spread independently, so counterparty risk is not a concern for retail traders. Bull call spreads can be placed on any optionable U.S. equity, ETF, or index, and are compatible with both standard margin accounts and certain retirement accounts depending on broker approval levels.