Bull Call Spread
Function: Medium-Risk Speculation
Outlook: Bullish
Establishing a Bull Call Spread involves buying a call at a lower strike price and selling a call with the same expiration date, but with a higher strike price that the call you bought. Compared to most option spreads, the bull call spread is a low risk, low reward strategy because it has limited downside and limited possible profits.
As the graph below shows, establishing a bull call spread is much like going long calls. However, the bull call spread allows some downside protection, so it's not quite as risky as going long calls. This results in lower possible profit potential for the bull call spread.
Bull Call Spread Payoff Graph:
