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

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A Bull Call Spread strategy involves taking two positions of buying a Call and selling a Call option. In this strategy, you Buy 1 ITM Call Option and Sell 1 OTM Call Option. For example, if you expect TCS price to rise moderately in the near future then you can Buy 1 lot of TCS Call Option at ITM and Sell 1 lot of TCS Call Option at OTM. You will earn the maximum profit when both of your Options are exercised and incur the maximum loss when both Options are not exercised and expires worthless.

When to use a Bull Call Spread strategy?

A Bull Call Spread is an option strategy used by traders when they are bullish in the market and expect a mild rise in the price of the underlying. The maximum profit and loss in this strategy is limited.

Max Loss = Net Premium Paid

Max Profit= (Strike Price of Call 1-Strike Price of Call 2)- Net Premium Paid

Bull Call Spread Strategy Payoff Graph