Quick Answer
A call bull spread is a bullish vertical: buy the lower-strike call and sell the higher-strike call at the same expiration for a net debit. It profits as the futures rises and the gap between the two call values widens toward the strike difference. Maximum profit is the strike difference minus the debit; maximum loss is the debit.
The call bull spread is the first of four vertical spreads, and the cleanest place to learn the pattern. It is a bullish position built from two calls, and everything else in this unit builds on the logic here.
The Bullish, Capped-Both-Ways Position
A call bull spread (also called a bull call spread, a long call spread, or a debit call spread) is a bullish vertical made of two calls at the same expiration. It is a lower-cost, capped way to be bullish on a futures price, cheaper than buying an outright call because selling the higher-strike call pays for part of the lower-strike call.
- Recall from the general options terminology unit that a call is the right to go long the future at the strike. Owning a call is bullish.
- You own the more valuable right (the lower strike) and finance it by selling the less valuable right (the higher strike).
- Because both legs share one expiration and the strike gap is bounded, both the profit and the loss are capped. There is no runaway outcome in either direction.
Build: Buy the Lower Strike, Sell the Higher Strike
- Buy the call at the lower strike; sell (write) the call at the higher strike, same expiration, same underlying futures.
- The lower-strike call costs more than the higher-strike call brings in, so you pay to enter. The position is a net debit (premium paid), and that debit is the cash at risk.
Think of it this way: you are buying the stronger bullish right and using the sale of a weaker one to knock down the price. The trade-off is that the sold call caps how high your profit can go.
Direction: Profits as the Futures Rises and the Spread Widens
NFA annotates this spread "spread to widen." Here is the cause-and-effect chain:
- Futures price rises → the lower-strike call gains value faster than the higher-strike call → the gap between the two call values widens toward the strike difference.
- The gap can widen only up to the strike difference. Once the futures sits at or above the higher strike, both calls are deep in the money and move point-for-point, so the gap freezes at the full distance between the strikes. That ceiling is what caps the profit.
Exam Tip: Gotchas
- Widen, not narrow. A debit spread needs the gap between the two calls to grow. If an answer says this spread profits as the spread narrows, it is describing a credit position.
Maximum Profit and Maximum Loss
- Maximum profit = (strike difference) minus the net debit. Reached when the futures settles at or above the higher strike (both calls in the money, gap at the full strike difference).
- Maximum loss = the net debit paid. Reached when the futures settles at or below the lower strike, so both calls expire worthless and the whole debit is gone.
- Breakeven (concept): lower strike plus the net debit. The futures has to clear the debit above the lower strike before the position turns positive.
| Call bull spread | Detail |
|---|---|
| Build | Buy lower-strike call, sell higher-strike call (same expiration) |
| Cash flow | Net DEBIT (premium paid) |
| Outlook | Bullish (moderate rise) |
| Profits when | Futures rises; the call-value gap WIDENS toward the strike difference |
| Maximum profit | (strike difference) minus net debit |
| Maximum loss | net debit paid |
Example: buy the 100 call and sell the 110 call for a net debit of 4.
- Strike difference = 110 minus 100 = 10.
- Maximum profit = 10 minus 4 = 6, reached at or above 110.
- Maximum loss = 4, reached at or below 100.
- Breakeven = 100 plus 4 = 104.
- Check: max profit plus max loss = 6 plus 4 = 10, the strike difference. Foots.
Exam Tip: Gotchas
- A call bull spread is a DEBIT. You pay to enter, and the debit is the most you can lose. An answer that calls it a credit position has swapped it with the call bear spread (its mirror).
- The max profit is the strike difference minus the debit, not the strike difference. The sold call caps the upside; the debit you paid comes out of it. Reporting the full strike difference as the profit forgets the cost of entry.