Bull call spread
Buy a call and sell a higher-strike call with the same expiry. You pay less than for the call alone, and give up gains above the upper strike.
How it is built
- Buy 1 lot of an at-the-money call (CE).
- Sell 1 lot of a higher-strike call (CE), same expiry.
- The premium received from the sold call lowers the cost of the bought one.
A structure for a view that the index will rise moderately by expiry, with a known maximum loss.
Risks
- The whole net premium is lost if the index ends at or below the lower strike.
- Profit is capped at the upper strike, however far the index rises.
- Time decay works against the position while the index stays below the break-even.
How the Greeks behave
- Delta
- Positive, smaller than a single call
- Theta
- Usually negative near the lower strike
- Vega
- Small; the two legs offset each other
Worked example on Nifty 50
| Leg | Premium per unit | Cash flow |
|---|---|---|
| Buy 1 lot 25,000 CE | ₹209.21 | −₹13,599 |
| Sell 1 lot 25,500 CE | ₹44.20 | +₹2,873 |
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Bull call spread on other indices
Frequently asked questions
What is the maximum loss on a bull call spread?
The net premium paid for the spread, plus charges. It is reached if the index ends at or below the lower strike at expiry.
What is the maximum profit?
The difference between the strikes minus the net premium, times the lot size. It is reached if the index ends at or above the upper strike.
Does a bull call spread need margin?
Brokers recognise the hedge, so the margin is much lower than for a naked sold call. The bought call must be in place before the sold call.