Bull call spread: paying for upside
Define a bull call spread, identify its two legs, and compute its net debit on a simple example.
Lesson path
Options, Risk Math, and Psychology
Vertical Spreads
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Define a bull call spread, identify its two legs, and compute its net debit on a simple example.
Two calls. One spread.
A vertical spread is just two options of the same type — both calls, or both puts — with the same expiry but different strike prices. The bull call spread is the most popular one. The name tells you the bias: you're bullish, and you're using calls. You buy one call at a lower strike and you sell another call at a higher strike. Same stock. Same expiry day. That's the whole structure.
Why bother selling the upper call? Because it brings in premium, and that premium discounts the cost of the call you bought. A long call by itself can be expensive — sometimes $400, $500 on a liquid stock. Selling the upper-strike call might knock $150 off the price. Now you're paying $250 instead of $500. The trade-off is that your profit stops growing once the stock crosses the upper strike. You traded unlimited upside for a cheaper entry.
Two terms to lock in now. Debit means money leaves your account — you're paying for the position. Spread width is the gap between the two strikes. In our example the width is $55 − $50 = $5, or $500 per contract. The relationship between debit and width is the entire math of this trade, and we'll unpack that in lesson 5. For now: the bull call spread is a cheaper, capped version of buying a call.
When does a trader actually pick this over a single call? When they think the stock will move up, but not too far up. If you expect a $5 grind higher into earnings, the bull call spread captures that move at a fraction of the cost. If you expect a $20 moonshot, a single long call lets you ride it. The spread is a precision tool — pick the right tool for the move you actually expect.
Recap: bull call spread = buy lower call + sell higher call, same expiry. Pay a net debit. Cheaper than a single call, but profit caps at the upper strike.
Knowledge check
Answer before moving on.
1. You buy the $100 call for $4.20 and sell the $105 call for $1.70 — same expiry. What's the net debit per contract?
2. Why would a trader pick a bull call spread instead of just buying a single call?
3. In a bull call spread, which two strikes do you trade?
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