ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

What Are Options | The Bull Call Spread

Updated on July 12, 2012

Spreads | The Bull Call Spread

The bull call spread involves the purchase of a call option on a specific underlying security, while simultaneously selling or “writing” a call option on the same security with the same expiration date, but a higher strike price. This slightly advanced options and very popular technique is classified into a group of strategies known as vertical spreads. Vertical spreads are a family of spreads involving stock options with the same underlying security, the same expiration month, but different strike prices. Spreads can be created with either call options or put options and can be used to establish either a bullish or bearish position; thus they can be used by investors with different stock and market sentiment.


Before reading about the bull call spread options strategy, make sure your familiar with how call options work. The purchase of a call option is referred to as being long a call while selling a call option is known as being short a call.

The bull call spread is most useful when one has a moderately bullish outlook on a particular stock. If one holds a strongly bullish view on a stock he/she would be better off by employing the long call strategy since profits are limited from the bull call spread. The bull call spread is pertinent when an investor wants to capitalize on an small increase in the price of the underlying security.

Bull Call Spread Video Tutorial

The Bull Call Spread | Advantages and Disadvantages

The bull call spread is employed by purchasing an “at the money” call option on a specific security. This call option grants the buyer the right, but not the obligation, to purchase 100 shares of the underlying security at the strike price, prior to the expiration date. Simultaneous with the purchase of the call option, an “out of the money” call option is sold or “written”. While short this call option, the investor can be assigned to deliver 100 shares of the stock at the strike price should the price of the security rise above the strike price. The sale of the higher strike call serves to offset the cost of the call that is purchased, effectively reducing the price paid to buy the call. Also, the total risk involved is less than actually purchasing a call option alone, because the premium is reduced. Additionally, the long call purchased hedges the risk of the overall trade because if assigned to deliver the stock at the short call strike price the investor can exercise the lower strike call and purchase the stock at the lower strike price. Therefore, the bull call spread has three main advantages:

  • Risk is limited to the overall price paid to place the trade: Max loss = Initial debit paid
  • If the stock price fails to rise above the strike price of the short call, but is higher than the strike price of the long call, the profit is greater than simply buying the call alone
  • Reduces the cost of purchasing call options

The main disadvantage of the bull call spread is that the potential for profit is limited. The gains are capped at the strike price of the short call. Also, as with the long call strategy, if the stock price falls the entire inital investment can be lost. Options can be risky as one can lose their entire initial investment and therefore investors must make sure then understand the inherent risks involved with buying call options. Therefore, the main disadvantages of the bull call spread are:

  • Profit is limited: Max profit = Short call strike price - long call strike price - debit paid
  • Single direction trade, profit is accrued only when stock price rises.
  • Entire premium will be lost is the stock price falls below the strike of the purchased call option

Bull Call Spread Conclusions

Vertical spreads can be a good way to establish a cheap bet the the price of a specific stock will rise. The bull call spread is a limited profit, limited loss options strategy that can be utilized when an investor has a moderately bullish view on a specific stock. Trading stock options can be risky and one should never purchase call options with more than what he or she can afford to lose. However, when done correctly the bull call spread can allow an investor to establish a cheap long stock position and to profit from a rise in the security’s price.

Don't forget to check out the rest of my Hubs and to follow me on Twitter @Enni82!

If you enjoy writing and would like to earn some additional income, you can write for HubPages too! Sign up now!


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)