Bull Call Spread

A bull call spread is a type of trading strategy used when trading in options.

The trader believes that a particular security will go up a moderate amount in the near-term, so he or she purchases one call option, and at the same time sells another call option with the same expiration month, but with a higher strike price (the price at which an option can be exercised).

For example, a stock is now trading at $15 per share; the investor purchases a call option with a strike price of $21 and sells another call option with a strike price of $30. Since the investor wrote a call option with a strike price of $30, if the price of the stock jumps up to $36, the investor is obligated to provide shares to the buyer of the short call at $30. This is where the purchased call option allows the trader to buy the shares at $21 and sell them for $30, rather than buying the share at the market price of $36 and selling them for a loss.