What Is a Bull Call Spread?

A bull call spread is two calls on the same stock with the same expiration. You buy one call at a lower strike and sell another at a higher strike.

The call you buy profits if the stock rises. The call you sell brings in a premium that lowers the cost of the trade, and in exchange you give up any gain above the higher strike.

The worked example. A stock trades at $100. With three months to expiration and 25% volatility, the $100 call costs $4.98 and the $110 call costs $1.68. Buy the first and sell the second, and the spread costs $3.30.

Maximum loss: $3.30, the net cost, if the stock finishes at or below $100.

Maximum gain: $6.70, the $10 gap between the strikes minus the $3.30 cost, if the stock finishes at or above $110.

Breakeven: $103.30, the lower strike plus the net cost.

Traders call it a debit spread, because opening it costs money, and a vertical spread, because the two calls differ only in strike.
Mid-century illustration of a figure at the top of a short flight of stairs under a low arched ceiling

Remember

Four things to keep in mind about a bull call spread.

  • The net cost is the premium paid for the lower-strike call minus the premium received for the higher-strike call.

  • The short call trades away every gain above the higher strike in exchange for a cheaper entry.

  • At expiration, profit rises one for one between the two strikes and stays flat outside them.

  • The maximum gain and the maximum loss always add up to the gap between the strikes.

Reading the Worked Example

Top: profit at expiration. The coral line is the spread, and the dashed line is the $100 call bought on its own. Below $100 the spread loses $3.30, less than the call's $4.98, because the sold call paid for part of it. Between $100 and $110 the spread gains a dollar for every dollar the stock rises, and it breaks even sooner, at $103.30 against $104.98. Above $110 the spread stops at $6.70 while the lone call keeps climbing. The spread comes out ahead whenever the stock finishes below $111.68; above that, the lone call wins.

Bottom: value before expiration. Before expiration the spread is worth less than its full $10 even when the stock is above $110, and more than zero when the stock is below $100. With three months left and the stock at $110, it is worth $6.20, not $10. As time runs out the value moves toward the expiration line, so a trader who expects a rise needs it to come before the options expire.

The prices come from the Black–Scholes model with zero interest. Real quotes add a gap between the buying and selling price on each of the two calls.
Chart of a bull call spread: profit at expiration against the share price, compared with buying the $100 call alone, and the spread value with three months, one month and no time left

Choosing and Comparing Spreads

  • Wider or Narrower

    Moving the sold call to a higher strike raises both the cost and the maximum gain. A narrow spread is cheap with a low ceiling; a wide one behaves more like the call on its own.

  • Risk Known in Advance

    The most you can lose is the net cost, fixed on the day you open the trade. No move in the stock can make the loss larger.

  • The Mirror Image

    A bear put spread does the same for a fall: buy a put at a higher strike and sell a put at a lower one.

FAQ

  • What is a bull call spread?

    Buying a call at one strike and selling a call at a higher strike, on the same stock with the same expiration. It profits from a moderate rise, and both its gain and its loss are capped.

  • How do you calculate the breakeven of a bull call spread?

    Add the net cost to the lower strike. In the worked example, $100 plus $3.30 gives a breakeven of $103.30.

  • What is the maximum profit of a bull call spread?

    The gap between the strikes minus the net cost, reached when the stock finishes at or above the higher strike. In the example that is $10 minus $3.30, or $6.70 per share.

  • When is a bull call spread better than buying a call?

    When you expect a moderate rise. The spread costs less and breaks even sooner. The call on its own does better only after a large rise: above $111.68 in the example.

  • What happens if the stock finishes between the two strikes?

    The bought call is in the money and the sold call expires worthless, so the spread is worth the share price minus the lower strike. At $106 it is worth $6, a profit of $2.70.

Learn the Bull Call Spread and Other Vertical Spreads

Our Stock Options course covers spreads, payoff and profit diagrams, and the strategies built from calls and puts, along with the Greeks and implied volatility, in video lessons with quizzes.