Because of put-call parity, a bull spread can be constructed using either put options or call options. If constructed using calls, it is a bull call spread. If constructed using puts, it is a bull put spread.
A bull call spread is constructed by buying a call option with a low exercise price, and selling another call option with a higher exercise price.
Often the call with the lower exercise price will be at-the-money while the call with the higher exercise price is out-of-the-money. Both calls must have the same underlying security and expiration month.
When the market is volatile and you are moderately bullish on it, you can minimize your cash invested in a position, and minimize your risk while still reaping high profit potential by utilizing a Bull Call Spread. This strategy involves buying a call option at one strike price and selling a call on the same asset at a higher strike price. Usually both options will have the same expiration date.
Your cost in establishing this position is less than it would be in just buying a call option, because you are also selling a call at a higher strike price. So you are taking in some money from that sale which reduces your cost outlay and raises your ultimate return-on-investment.
source: www.mindxpansion.com
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