Bull Call Spread
The Bull Call Spread is a low risk options trading strategy that can be used when your analysis indicates that the price of a stock, ETF, index, or commodity futures contract has strong probability of going higher.
This option strategy is a debit spread that can be traded in two ways depending on how aggressive you want to be. In the conservative strategy, buy an ITM (lower strike price) Call and sell an ATM (higher strike price) Call; in the aggressive strategy buy an ATM (lower strike price) Call and sell an OTM (higher strike price) Call 45 days to 90 days until expiration.
Entry Rules
Bullish expectations for the underlying asset. Pay no more than $3 for a $5 spread, and $5 for a $10 spread, including commissions.
Exit Rule Insights
- Cut your losses short. Sell the position anytime the price of the spread falls to 60% of your purchase price.
- Close (sell) your position with 30 days to expiration.
- Evaluate your position at 80-100% profit.
If you are still Bullish, sell 50% of your position to take your money off the table.
Sell your remaining position if it moves back to your original purchase price. This leaves you with a 50% profit on the entire trade. Otherwise, close out the remainder of your position at 75% – 80% of maximum spread or with 30 days to expiration.
If you are no longer Bullish sell your entire position for a profit.
Profit & Loss Calculations
Maximum Risk – Limited to the net debit paid for the spread
Maximum Profit – Limited to difference in strike prices – net debit paid
Breakeven – Lower Call strike price + net debit paid
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