What is a call spread?

A key point to remember is that call spreads consist of call options only. In a nutshell, when the same number of call options are bought and sold at the same time its a call spread. Your profit is limited, but on the plus side, your risk is minimal. So far, so good. And they are cheaper to implement.

How do I choose a bull call spread?

For a bull call spread, the bought call option should have a lower strike price than the sold call option. For a bear call spread, the sold call option should have a lower strike price than the bought call option. Select the expiration dates for the call options. For vertical call spreads, the expiration dates should be the same.

What is a bullish call spread?

The strategy uses two call options to create a range consisting of a lower strike price and an upper strike price. The bullish call spread helps to limit losses of owning stock, but it also caps the gains. A bull call spread is an options strategy used when a trader is betting that a stock will have a limited increase in its price.

How does a bear call spread work?

To establish a Bear Call Spread, an investor sells an in-the-money call option (lower strike price) and simultaneously purchases an out-of-the-money call option (higher strike price) on the same underlying asset, with both options sharing the same expiration date.