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Strategy: Bull Call , 1 strike down to ATM strike

a.k.a. Bull Call Spread, Bull Call Vertical

Bull Call Neutral Option Graph

The Outlook: Neutral to mildly bullish. The stock must remain near where it is when you enter the position, or move higher, by expiration.

The Trade: buy Call ITM and sell Call ATM.

Gains when: stock stays put, or falls slightly, or rises.

Maximum Gain: difference in strike prices - initial debit.

Loses when: stock falls too much.

Maximum Loss : limited to the initial debit.

Breakeven Calculation: Long Call strike + initial debit.

Advantages compared to stock: limited risk, less capital needed, greater leverage, can gain even if stock drops slightly.

Disadvantages compared to stock: gains are limited to the upside if stock rises more than the sold strike, no dividends.

Volatility: after entry, increasing implied volatility is positive if the stock falls, but negative if the stock rises.

Time: after entry, the passage of time is positive if the stock rises, but negative if the stock falls.

Margin Requirement: None. The initial debit must be paid in full.

Variations: see the Vertical Spread Strategies page and the All Bull Call debit spread graphs page.

Synthetic Equivalent: Long Stock plus Long Put ITM plus Short Call OTM. (A "collar".)


  • This Bull Call can be used if you are mildly bullish on a stock and also want a little bit of downside protection.
  • This Bull Call is probably the most similar pure options strategy to the Covered Call, with the added advantage of a known and limited risk, like a Collar. The strategy retains some "downside protection" as well as limited gains to the upside.
  • The short call(s) will limit gains to the upside, so you don't want to be "too" bullish.
  • The best time for entry of this Bull Call is when a stock has higher than normal implied volatility, and you expect the stock price to stay at current levels or drift higher. Entering when volatility is higher will reduce the debit on entry, which lowers the breakeven and gives more downside protection. If the stock price then stays reasonably steady or rises, both the passage of time and the IV returning to normal (lower) levels will benefit the strategy.
  • The Bull Put, -1 to ATM is a nearly identical trade, done with puts instead of calls, and entered for a credit instead of a debit. One advantage of the put strategy is that if the stock moves bullishly like you expect, the puts will expire worthless and they won't need to be traded out of, saving commission charges.


  • Since this is a neutral to bullish position, the trader is expecting the stock to stay put or rise. If the stock falls instead, the trader would be wise to cut his losses short. Using the example graph, if the stock fell to about $47.50 at any time, the trade could be exited for a loss of about $100. Just sitting and waiting could likely result in the maximum loss of $341 - more than three times that much.
  • If the stock stays above the breakeven point, the trader should stick with the position. As the option graph shows, just the passage of time is a benefit at any stock price above breakeven.
  • If the stock rises over the strike you sold and you do not trade out of the position before expiration, it is possible to receive an automatic exercise on the long call, so you will buy the stock, and be assigned on the short call, so you will sell the stock short. See the Rules, Tips, & Techniques page for more.


  • It is not usually recommended to adjust one part of a Bull Call. If you take a trading profit on the short calls when the stock drops for instance, you are actually increasing your maximum risk. You might think you will sell the calls again the next time the stock goes up, but what if it doesn't?
  • It is possible to roll the entire bull call to lower strike prices if the stock drops, but that really amounts to closing one trade at a loss and opening another trade in hopes of a gain. Plus, the stock has not behaved bullishly yet you are taking a second bullish position.
  • If a bull call works out better than you expected and you want to stick with the stock, you can buy back the short calls, and exercise the long calls, so that you end up with just stock, with all the inherent risks and rewards.
  • Or if the stock rises to near the sold call strike with expiration near and you have made 80% or so of the total possible on the short calls, you can roll everything out to the next month, and higher strike prices, if you are still bullish on the stock.

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