What is a Bull Call Spread strategy? When is it used?

In a Bull Call Spread option strategy, two positions are taken, namely the buying of a Call option and the selling of a Call option. In this strategy, you Buy 1 ITM Call option and Sell 1 OTM Call option.

It is also known as the "long call spread" and "debit call spread".

Bull call debit spread example

For example, if you expect the TCS price to rise moderately in the near future, you can Buy 1 lot of TCS Call Option at ITM and Sell 1 lot of TCS Call Option at OTM. You will realize the maximum profit if both options are exercised and suffer the maximum loss if both options are not exercised and expire worthless.

When to use Bull Call Spread strategy?

A Bull Call Spread is an option strategy traders use when they are optimistic about the market and expect the price of the underlying asset to rise slightly. The maximum profit and loss is limited with this strategy.

Maximum loss = Net Premium Paid

Maximum profit = (strike price of Call 1 - strike price of Call 2) - net premium paid

Bull Call Spread Strategy Payoff Graph