Bull Call Spread
A bull call spread is a long call combined with a short call that has a higher
strike price. Both calls are on the same underlying and share the same
expiration month. Because the purchased call has a lower strike price, it
costs more than the call being sold. Establishing the trade results in a debit
to the trader’s account. Because of this debit, it’s called a debit spread.
Below is an example of a bull call spread on Apple Inc. (AAPL):
In this example, Apple is trading around $391. With 40 days until
February expiration, the trader buys the 395–405 call spread for a net debit
of $4.40, or $440 in actual cash. Or one could simply say the trader paid
$4.40 for the 395–405 call.
Consider the possible outcomes if the spread is held until expiration.
Exhibit 9.1 shows an at-expiration diagram of the bull call spread.
EXHIBIT 9.1 AAPL bull call spread.
Before discussing the greeks, consider the bull call spread from an at-
expiration perspective. Unlike the long call, which has two possible