A Bull Call spread is an options trading strategy designed to benefit from a stock's limited increase in price. 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. For example, "if you believe that XYZ Company's stock will only go up $2 in the next month, you could buy one $50 call option and sell one $52.50 call option for a net debit of $2 per share. If at expiration the stock is above $52.50 per share, your option will be worth at least the difference between the exercised prices ($50 - $52.5), or $0.50 per share profit minus commissions paid on both legs of the trade."The bull call spread can be used as either a directional or non-directional trade and has less risk than owning shares outright while still allowing for some upside potential.. Unlike buying calls outright which gives an investor unlimited upside potential with no defined downside risk, buying into a bull put spread limits profits but also sets a floor on how low shares can fall before becoming worthless.If executed correctly, this conservative strategy offers investors who are bullish on their underlying security limited downside with defined maximum profits--"a great way to reduce portfolio volatility while maintaining exposure to upward movement in prices."
