   7: The Bull Call Spread Strategy Strategy: Bull call spread Opening the Trade: 1. "Buy to open" a call option on company X and 2. "Sell to open" a call option on company X at a strike higher than the long call Closing the Trade: 1. "Buy to close" a call option with the same strike and expiration as your short call AND "sell to close" a call option with the same strike and expiration as your long call 2. Let both options expire worthless 3. Let the short option expire worthless AND exercise the long one 4. You get exercised on the short one AND you exercise the long one Summary: This is called a Bull Call Spread, because you are bullish on the underlying stock (you think it will go up in price), you use two call options to open the trade (one you buy and one you sell), and its a spread (the call you buy protects the call you sell). In fact, this is just like a covered call, except you buy a call option instead of the stock itself. Your profits are limited on the upside, and your losses are limited on the downside! This is the most common type of spread. No margin is required to open a bull call spread. Maximum Profit: The difference between the two strike prices minus your cost to open the spread. Maximum Loss: The cost to open the spread. Breakeven: You lose money on this trade if the stock price is below the lower strike price plus the cost to open the spread.  Figure 1: 55/60 Bull Call Spread on XYZ Example:
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