---
description: "A bullish vertical spread buying a near-ATM call at K1 and selling an OTM call at K2 > K1 for a net debit, capping both profit and loss."
tags: [options, speculation, bullish, vertical-spread]
---

# Bull Call Spread

**Section**: 2.6 | **Asset Class**: Options | **Type**: Speculation

## Overview
The bull call spread is a vertical spread consisting of a long position in a close to ATM call option with strike K1, and a short position in an OTM call option with a higher strike K2. This is a net debit trade. The trader's outlook is bullish: the strategy profits if the stock price rises. This is a capital gain strategy.

## Construction
- Buy 1 call option at strike K1 (near ATM), paying debit D
- Sell 1 call option at strike K2 (OTM, K2 > K1), same expiry

Net debit: D = premium paid for K1 call - premium received for K2 call

## Payoff Profile
f_T = (S_T - K1)+ - (S_T - K2)+ - D

- Breakeven: S* = K1 + D
- Max profit: P_max = K2 - K1 - D  (achieved when S_T >= K2)
- Max loss: L_max = D  (if S_T <= K1 at expiry)

## Key Conditions / Signals
- Moderately bullish outlook; expects stock to rise toward or above K2 by expiry
- Prefer when implied volatility is low (cheaper debit to enter)
- Lower cost and lower risk than buying a naked call; upside is capped at K2

## Notes
Both profit and loss are limited. The maximum gain equals the spread width minus the net debit. This strategy is appropriate when the trader has a directional view but wants to reduce the premium outlay compared to a simple long call.