A Bull Call Spread is a strategy wherein the investor establishes a spread by buying call options of lower strike price and selling call options of a higher strike price.
The name ‘Bull’ spread itself signifies that the investor is bullish on the price of the underlying security.
When to use this strategy?
This strategy is used when the investor ia moderately bullish on the underlying security.
How to build this strategy?
This strategy has two legs:
Leg 1 – Buy ITM Call
Leg 2 – Sell OTM Call
Credit Spread/Debit Spread
This is a Debit Spread strategy.
This strategy has limited profit potential.
When is this strategy profitable?
The investor reaps maximum profit when the underlying security’s price is greater than or equal to the strike price of the call option sold.
The investor faces limited risk in this strategy.