A bull spread is an options position designed to benefit from a rise in the underlying while limiting both upside and downside. A common version is the bull call spread: buy a call at a lower strike and sell another call at a higher strike, with the same underlying and expiration.
The long call provides upside exposure. The short higher-strike call reduces the upfront cost but caps the maximum gain once the underlying rises beyond that strike.
Bull call spread payoff
Let the lower call strike be K1 and the higher strike be K2, with K1 < K2. Ignoring premiums, the expiration payoff is:
max(ST - K1, 0) - max(ST - K2, 0)
Below K1, both calls expire worthless. Between the strikes, only the lower-strike call has intrinsic value. Above K2, gains on the long call are offset by losses on the short call, so the spread reaches its maximum intrinsic value of K2 - K1.
Suppose an investor buys a $100 call for $6 and sells a $110 call for $2. The net debit is $4. The maximum loss is generally that $4 debit per share before transaction costs. The maximum profit at expiration is the $10 strike width minus the $4 debit, or $6 per share. The approximate breakeven is the lower strike plus the net debit, or $104.
Bullish does not mean unlimited upside
A bull spread expresses a bullish view, but unlike a standalone long call it deliberately gives up gains above the upper strike. The investor is exchanging some potential upside for a lower entry cost and a more tightly defined payoff range.
That can make the spread attractive when the investor expects a moderate rather than unlimited move, but the payoff shape does not tell us whether that expectation is correct.
Bull call spread versus bull put spread
Bullish spreads can also be built with puts. A bull put spread generally sells a higher-strike put and buys a lower-strike put. Under matched European assumptions, put-call relationships can make certain call and put spread payoffs economically related, but real-world premiums, early exercise, dividends, borrow, taxes, and transaction costs can create practical differences.
The label "bull spread" therefore describes the payoff orientation, while the exact option legs determine cash flow, assignment exposure, margin treatment, and operational behavior.
Sensitivities before expiration
A vertical spread does not have one fixed Option Delta, Option Gamma, Option Theta, or Option Vega throughout its life. Each leg's sensitivity changes with underlying price, time, and implied volatility.
Near expiration, the position can become especially sensitive when the underlying is close to one of the strikes. Assignment risk can also matter for American-style short options.
What a bull spread does not establish
A bounded maximum loss is not the same as low probability of loss. The full debit can be lost if the underlying finishes below the lower strike in a bull call spread. Likewise, a capped maximum gain can be reached only if the underlying moves far enough by expiration.
A bull spread is a defined-payoff structure, not a recommendation, forecast, or guarantee that a bullish thesis will work.
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