what is the bull call spread 
the bull call spread is a type of options trading strategy that involves two call options the bull call strategy is executed by purchasing call options at a specific strike or exercise price while also selling the same number of calls of the same asset at a higher strike price it should be noted that both options should have the same expiration date this type of strategy is used when the trader expects a moderate rise in the price of an underlying asset the goal of a bull call spreadthe goal of a bull call spread is to profit from a moderate increase in the price of the underlying asset if the price of the underlying asset rises moderately and is near or above the higher strike or exercise price at expiration the strategy will reach its maximum profit however if the price falls or does not rise significantly the strategy will incur a loss which is limited to the net premium paid to establish the spread the construction of a bull call spreadconstructing a bull call spread involves the following steps it should be noted that the maximum profit in a bull call spread is limited to the difference between the strike price of the two call options less the net premium paid the maximum loss is limited to the net premium paid to establish the spread calculating bull call spread gains losses and b ehere is an example of a bull call spread it should be noted that this example does not take into account transaction costs or taxes which can affect the profitability of the strategy a trader has identified the underlying asset as a stock called abc abc is currently trading at 50 and the trader thinks that the stock will rise moderately over the next month the trader then decides to set up a bull call spread to profit from this expected price increase the trader will buy a call option with a strike price of 50 that expires in a month s time this is called an at the money option because the strike price is equivalent to the current trading price the premium or cost of this option is 3 per share for 100 shares simultaneously the trader sells a call option on the same stock with a strike price of 55 that also expires in one month with a cost of 2 per share for 100 shares this option is called an out of the money option because the strike price of the call is higher than the current trading price of the underlying asset this trader has now put together a bull call spread with the initial values the maximum loss is the net premium paid for the options the formula for the maximum loss of a bull call spread is as follows since each options contract represents 100 shares the total maximum loss would be the maximum gain is the difference between the strike prices of the two options minus the net premium paid the formula for the maximum gain of a bull call spread is as follows plugging in the values results in the following since the options are for 100 shares multiply the gain by 100 the total maximum gain would be 400 the breakeven price is the market price an asset needs to reach for the spread to return the money spent the formula to breakeven is so the stock would need to rise to 51 by the expiration date for the trader to break even bull call spread pros and consinvestors can realize limited gains from an upward move in an asset s pricea bull call spread is cheaper than buying only an individual call optionthe bullish call spread limits the maximum loss of owning an asset to the net cost of the strategythe investor forfeits any gains in the asset s price above the strike of the sold call optiongains are limited given the net cost of the premiums for the two call optionsthe effect of volatility on a bull call spreadas it relates to a bull call spread the effect of volatility is somewhat neutralized this is due to the result of buying and selling call options on the same underlying asset with the same expiration date 