Bull Call Spread
A defined-risk bullish strategy: buy a call and sell a higher strike call to reduce cost, with capped profit.
Why traders use it
- Lower premium than a naked long call
- Defined max loss and max profit
- Works for moderately bullish views
Payoff characteristics
At a glance
| Metric | Behavior |
|---|---|
| Max loss | Net premium paid |
| Max profit | Strike difference − net premium |
| Best case | Underlying closes above higher strike |
Practical deep‑dive
Info
Profile
Best suited for a bullish or mildly bullish view.
Strategy snapshot (quick)
| Field | Value |
|---|---|
| Style | spread debit |
| Cost type | Typically a debit-style structure (you pay premium). |
| Best when | You have a directional view and want lower cost than a naked option, with defined risk. |
| Watch out | Capped profit and time decay; don’t overpay premium in very high IV. |
Greeks to watch
Focus on these exposures first
| Greek | Why it matters |
|---|---|
| Delta | Directional exposure |
| Theta | Time decay works against you |
| Vega | IV changes can dominate P&L |
Professional options traders focus on “structure first”: define risk, choose strikes/liquidity, and write down exit rules before entry. Most losses come from oversized positions and holding short-dated options without a plan.
Execution checklist
Use this before placing the trade
| Check | Why it matters | Quick test |
|---|---|---|
| Liquidity | Spreads can eat edge | Tight bid‑ask + decent volume/OI |
| Risk defined | Prevents blow-ups | Max loss is known and acceptable |
| Time horizon | Avoid time mismatch | Expiry matches your view timeframe |
| Volatility regime | Premium cost changes outcomes | IV not extreme vs recent range |
| Exit plan | Stops emotional decisions | Target/stop/time exit written down |
Mistakes to avoid
- Trading illiquid strikes (wide spreads) because premium looks “cheap”.
- Using market orders during fast moves and getting poor fills.
- Adding to losing positions without a predefined rule.
- Ignoring event risk (results, policy events) near expiry.
- Overusing weekly expiries before mastering risk control.
Summary (takeaways)
- Prefer defined-risk structures while learning.
- Liquidity and execution quality matter as much as strategy selection.
- Consistency comes from process, not predictions.