Bull Call Spread (Debit)

Buy a call and sell a higher call to make a cheaper, defined-risk bullish bet with capped reward.

A bull call spread (vertical debit spread) buys one call and sells a higher-strike call in the same expiry. It cuts the cost of a long call in exchange for capping the upside.

Market outlook

Moderately bullish — you expect a move up to roughly the short strike, but not a runaway rally.

Construction

• Buy 1 call at lower strike $K_1$.
• Sell 1 call at higher strike $K_2$ ($K_2 > K_1$).
• Net debit $D = P_1 - P_2$.

Risk / reward

• Max loss: $D$, the debit paid.
• Max profit: $(K_2 - K_1) - D$
• Breakeven: $\text{BE} = K_1 + D$

When to use it

• You're bullish but want a cheaper, defined-risk position than a naked long call.
• High IV makes outright calls expensive — selling the upper strike recoups some cost.

Risks & management

• Capped gains: above $K_2$ you make no more, even if the stock soars.
• Risk/reward is fixed at entry; many traders close at 50–75% of max profit rather than holding to expiry.

Example

Stock at $100. Buy $100 call for $3.00, sell $105 call for $1.20. Debit $1.80. Max profit $3.20 (at $105+), max loss $1.80, breakeven $101.80.