Bull Call Spread | Options Strategy

A simple options strategy for bullish markets →

Hey there!

Bringing to you an options strategy for bullish markets - the Bull Call Spread.

➡️ A bull call spread can be applied when we expect markets to appreciate and trade within a range above the current price.

➡️ It is implemented by buying an at-the-money call option and selling an out-of-the-money call option.

➡️ The maximum loss will be restricted to the net premium paid, while the profit will be capped at the difference between the bought and sold call strike prices, less the net premium paid.

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Let’s understand the bull call spread strategy with the help of an example:

➡️ Assume we take the following positions in a NIFTY50 option as of 11th Sept 2023:

  • Buy a 19,900 put option for ₹216.25

  • Sell a 20,000 put option for ₹157.00

Considering, a lot size of 50, the net premium of this position is losing ₹59.25 per lot (157.00 - 216.25).

Let’s look at the payoff of such a position:

This position would yield a maximum profit of ₹2,037.50 while the loss would be restricted to ₹2,962.50. Hence, the breakeven price stands at 19,959.25.

None of the above are intended as recommendations. Please consult a registered advisor before buying/selling.

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