Bull Call Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to give decent returns in the near future. This strategy includes buying of an ‘In The Money’ Call Option and selling of ‘Deep Out Of the Money’ Call Option of the same underlying asset and the same expiration date.
This strategy is adopted by traders who are bullish in nature. He expects market and volatility to rise in the near future. A trader need not be direction specific here (i.e. an upward or downward trend, but a small bias towards an uptrend should always be present, as the gains will be much higher once the market moves up r ..
• Limited profit potential to the higher strike call sold if the underlying stock price rises. • Maximum profit only if stock rises to the higher of 2 strike prices selected.
Advantages
• Allows you to reduce risk and cost of your investment. • When placing the spread, exit strategy is pre-determined in advance. • Risk is limited to the net premium paid.
