Bull Call Spread: What You Should Know Before Trading Options with This Strategy

A bull call spread is a popular call spread option that helps traders limit risk while keeping costs low. But is it the right strategy for you? This guide breaks down how this bull spread option works, its pros and cons, and when it makes sense to use in the market.

Key Takeaways

• A bull call spread is a type of call spread option where traders buy and sell call options with different strike prices to limit risk and cost.
• This bull spread option offers defined risk and limited profit potential, making it a structured strategy for moderate bullish moves.
• Understanding the advantages and disadvantages of the strategy can help traders decide if it's the right choice for their risk tolerance and market outlook.

What is a Bull Call Spread?

A bull call spread is a type of call spread option that allows traders to take a bullish position while keeping costs and risk under control. Instead of buying a single call option, traders use this strategy by purchasing a lower strike call and simultaneously selling a higher strike call. This reduces the upfront cost but also limits the maximum profit.

This is the typical shape of the bull call spread profit and loss (P&L) graph:

At its core, a bull call spread is a debit spread, meaning traders must pay a net cost to enter the trade. The premium received from selling the higher strike call offsets some of the cost of buying the lower strike call, making it a more affordable alternative to buying a call outright.

How a Bull Call Spread Works

A bull call spread is a type of call spread option that allows traders to take a bullish position while keeping costs and risks controlled. The strategy involves buying a call option at a lower strike price and selling another call option at a higher strike price, both with the same expiration date. This creates a structured trade where potential gains are capped, but so are potential losses.

Since the purchased call costs more than the sold call, the trader pays a net debit to enter the trade, making it a debit spread. This means the maximum risk is known upfront—traders cannot lose more than what they initially paid. As a reminder, consider that we have bull call spreads on our options screener.

The key components of a bull call spread are:

• Long Call: The trader buys a call option with a lower strike price, which gives them the right to buy the stock at that price.
• Short Call: The trader simultaneously sells a call option with a higher strike price, collecting a premium but limiting the trade’s profit potential.
• Net Debit: Because the long call is more expensive than the short call, the trader pays a net debit upfront, which is the maximum loss for the trade.
• Defined Profit and Loss: The maximum profit is limited to the difference between the two strike prices minus the net debit paid.

This strategy is part of a broader category of bull spread options, designed for traders who expect moderate bullish movement rather than a large price surge.

Bull Call Spread vs. Buying a Call Option

A common question traders ask is: Why not just buy a call option instead? The answer comes down to cost and risk management.

With a single call option, there is unlimited upside, but the upfront cost is higher. The bull call spread reduces the initial investment since the premium received from the short call offsets some of the cost of the long call. However, the trade-off is a capped profit—even if the stock price skyrockets, gains are limited.

This makes the bull call spread ideal for traders who have a moderately bullish outlook but want to control costs and risk.

An Example on How to Use a Bull Call Spread

A bull call spread is best used when traders expect a moderate bullish move, not a massive rally. Since the strategy involves both buying and selling call options, it benefits from a steady rise in price while keeping costs and risk manageable.

Ideal Market Conditions

The bull call spread works well in situations where:

• The underlying stock has upward momentum but isn’t expected to skyrocket.
• The market has stable volatility, as extreme price swings can make other strategies more effective.
• The trader wants to reduce cost compared to buying a single call option while still gaining from a bullish move.

Since profits are capped at the strike price of the short call, the strategy is not ideal for aggressive bullish bets where the stock might surge beyond expectations.

Selecting Strike Prices

Choosing the right strike prices is key to balancing risk and reward. A narrow spread (closer strikes) lowers the cost but also limits potential profit. A wider spread increases the possible profit but costs more upfront.

Traders need to consider their outlook and risk tolerance when selecting strikes.

Expiration Considerations

The expiration date affects both cost and time decay:

• Short-term expiration (under 1 month): Lower cost, but time decay (theta) can quickly erode the spread’s value if the stock moves too slowly.
• Medium-term expiration (1-3 months): A balance between cost and time decay.
• Long-term expiration (over 3 months): More expensive but gives the trade time to work.

Shorter expirations make the trade cheaper but require the stock to move quickly. Longer expirations are safer but come with a higher upfront cost.

Example: Bull Call Spread on ABNB

Let’s say Airbnb (ABNB) is currently trading at $134.77. You expect the stock to rise but don’t want to risk too much on a single call option. Instead, you open a bull call spread with the following trade:

• Buy a $141 call option
• Sell a $142 call option
• Expiration: 3 weeks from today

This is the P&L chart of this bull call spread strategy:

From the chart above, you should take away two numbers:

• Max Loss: $9.50 per contract
• Max Profit: $90.50 per contract

For this trade to reach maximum profit, ABNB needs to move from $134.77 to at least $141.07 by expiration.

If ABNB stays below $141, the spread expires worthless, and you lose the full $9.50 paid. If it lands somewhere between $141.07 and $142, you make a partial profit. The best outcome happens if ABNB rises above $142, where you capture the full $90.50 gain.

This setup gives a high profit ratio, as you are risking $9.50 to potentially make $90.50—a very nice reward if the stock moves as you expect. A bull call spread allows traders to take bullish positions at a lower cost, making it an attractive alternative to outright call buying. However, the trade requires careful strike and expiration selection to optimize risk and reward.

Bull Call Spread vs Bull Put Spread

Both a bull call spread and a bull put spread are vertical spreads, meaning they involve buying and selling options with different strike prices but the same expiration date. While both strategies are used in bullish market conditions, they work in different ways and have distinct risk-reward profiles.

The Key Difference: Calls vs. Puts

The bull call spread is a call spread option that involves:

• Buying a call option with a lower strike price.
• Selling a call option with a higher strike price.
• Entering the trade for a net debit (cost to open the position).
• Profiting when the underlying stock rises above the higher strike price at expiration.

The bull put spread, on the other hand, is a bull spread option that:

• Sells a put option with a higher strike price.
• Buys a put option with a lower strike price.
• Enters the trade for a net credit (cash received upfront).
• Profits if the stock stays above the higher strike price at expiration.

Risk and Profit Potential

Both strategies have limited risk and limited reward, but the way they generate profits is different.

• Bull Call Spread: The trader pays a cost upfront and profits only if the stock rises above the short call's strike price.
• Bull Put Spread: The trader collects a premium at the start and profits as long as the stock remains above the higher strike put option.

The biggest difference is that a bull call spread requires the stock to rise, while a bull put spread can profit even if the stock moves sideways, as long as it doesn’t drop too much.

When to Use Each Strategy

Choosing Between a Bull Call Spread and a Bull Put Spread

Both strategies work well for traders with a bullish outlook, but the best choice depends on market conditions:

• Use a bull call spread when you expect the stock to move up (but not significantly, as there are likely better strategies for the times in which you expect a strong bullish move).
• Use a bull put spread when you expect the stock to stay above a certain level but don’t need a big rally.

A bull put spread offers a higher probability of success since the stock doesn’t need to rise much—or even at all. However, a bull call spread offers a greater potential reward if the stock does move up sharply.

Ultimately, the choice depends on your market outlook, risk tolerance, and strategy preferences.

Pros of a Bull Call Spread

The bull call spread is a popular options strategy because it allows traders to take a bullish position while managing risk and cost. Here are the key advantages of using this strategy.

1. Limited Risk

One of the biggest benefits of a bull call spread is that the maximum risk is clearly defined from the start.

• The most a trader can lose is the net debit paid when opening the trade.
• Unlike naked call strategies, there’s no risk of unlimited losses if the market moves in the wrong direction.
• This makes it an attractive choice for risk-averse traders who prefer structured, controlled positions.

2. Cheaper Compared to Other Strategies

Compared to buying a single call option, a bull call spread is a more cost-efficient way to take a bullish position.

• The short call option helps offset the cost of the long call, reducing the total upfront investment.
• Since the position costs less, it’s more accessible to traders with smaller accounts.
• A lower cost means the stock doesn’t need to move as much to generate a profit.

For example, if a trader buys a single call option for $5.00 per contract versus opening a bull call spread for $2.50 per contract, they risk half the amount while still benefiting from an upside move.

3. Can Potentially Profit from Moderate Bullishness

A bull call spread does not require a large price jump to generate a profit. It is designed for situations where a stock is expected to move moderately higher, rather than making an extreme rally.

• Unlike buying a single call option, where the stock needs to rise significantly to cover the cost of the premium, a bull call spread can be profitable with a smaller price increase.
• This makes it useful in markets where gradual price movements are more likely rather than sharp breakouts.
• As long as the stock closes above the breakeven point by expiration, the trade has the potential to be successful.

4. Higher Probability of Profit Compared to a Long Call

A bull call spread has a lower breakeven point compared to a single long call, making it a more forgiving strategy.

• Since the short call reduces the initial cost, the stock doesn’t have to rise as much to reach profitability.
• This means traders don’t need a massive rally to make money.
• If the stock moves up moderately, the trade can still be profitable, even if it doesn’t hit the highest strike.

For example, if a single call option has a breakeven price $10 above the current stock price, a bull call spread might only need the stock to rise $5 to become profitable. This higher probability of success makes it a preferred choice for traders who want to capitalize on steady upward movements.

Cons of a Bull Call Spread 

While a bull call spread is a useful strategy for limiting risk and cost, it does come with trade-offs. Here are some key drawbacks traders should consider.

1. Stock Movement is Still Required

Even though a bull call spread lowers the cost of entering a trade, the stock still needs to move up for the position to be profitable.

• If the stock doesn’t rise enough, the trader loses the entire net debit paid to enter the trade.
• Unlike a bull put spread, which can profit even if the stock moves sideways, a bull call spread needs an upward move.
• If the stock stays flat or declines, the trade expires worthless, and the trader takes a full loss.

This means that while a bull call spread is less expensive than buying a call outright, it still requires a correct directional prediction.

2. Gains are Capped

One major downside of a bull call spread is that profits are limited, regardless of how high the stock moves.

• Unlike buying a single call option, where there is unlimited upside, the short call in the spread limits potential gains.
• If the stock moves significantly higher than expected, the trader doesn’t benefit beyond the short call’s strike price.
• Even if the stock rallies strongly, the trader can only collect the maximum profit—nothing more.

For traders who expect a big breakout, a simple long call may be a better choice than a bull spread option.

3. Time is Not on Your Side

A bull call spread is still impacted by theta decay, which means the passage of time can reduce its value.

• Time decay works against the long call in the spread, especially if the stock moves too slowly.
• The closer the trade gets to expiration without the stock moving up, the less valuable the spread becomes.
• If expiration arrives and the stock hasn’t reached the breakeven point, the entire trade expires worthless.

Shorter expiration dates come with faster time decay, so traders need to be careful when choosing expirations for their call spread option.

4. Implied Volatility Can Work Against You

Changes in implied volatility can also affect the profitability of a bull call spread.

• If implied volatility drops, the long call loses value faster than the short call, making the spread less profitable.
• Bull call spreads are less sensitive to implied volatility than a single long call, but falling volatility can still reduce profitability
• The sold call offsets some of the benefits of a volatility increase, meaning traders don’t get the full upside from a volatility boost.

If a trader expects high volatility, they might prefer a different strategy, such as a long call or a straddle, to take full advantage of price swings.