What Is a Bull Call Spread?

A Bull Call Spread is an options strategy used when you are moderately bullish on a stock or index. It involves buying a lower strike call and selling a higher strike call of the same expiry.

This reduces the cost compared to buying a naked call, but it also caps the maximum profit.

🔹 Market View

• You expect the stock or index to rise moderately.
• You do not expect a big rally beyond a certain level.

🔹 Example

• Underlying: Nifty trading at 19,800
• View: Expect a rise, but not beyond 20,200
• Strategy: Bull Call Spread (monthly expiry)

1. Buy 19,800 CE at ₹150 premium
2. Sell 20,200 CE at ₹50 premium

🔹 Net Cost

• Premium Paid = ₹150 (buy option)
• Premium Received = ₹50 (sell option)
• Net Cost = ₹100 (per lot × lot size)

This ₹100 is your maximum risk.

🔹 Profit & Loss Scenarios

1. If Nifty expires below 19,800
   • Both options expire worthless.
   • Loss = ₹100 (Max Loss).
2. If Nifty expires at 20,000
   • 19,800 CE = ₹200 intrinsic value.
   • 20,200 CE = worthless.
   • Net payoff = ₹200 – ₹100 cost = ₹100 profit.
3. If Nifty expires at or above 20,200
   • 19,800 CE = ₹400 intrinsic value.
   • 20,200 CE = exercised → payoff given away (₹400 – ₹200 difference).
   • Net payoff = ₹400 – ₹200 = ₹200.
   • Minus cost (₹100) = ₹100 profit.

🔹 Strategy Summary

• Max Loss = Net premium paid = ₹100
• Max Profit = Difference in strikes – Net premium
  = (20,200 – 19,800) – 100
  = 400 – 100 = ₹300 per lot
• Breakeven = Lower strike + Net premium
  = 19,800 + 100 = 19,900

🔹 When to Use?

• When you expect a moderate rise, not a strong rally.
• Works best in stable to slightly bullish markets.
• Safer than buying a naked call because risk is capped