Bull Spread

A bull spread is a bullish options strategy that involves buying an out-of-the-money call option and selling an out-of-the-money call option with a higher strike price. The maximum profit for a bull spread is the difference between the strike prices, minus the cost of the spread. The maximum loss is the premium paid for the spread.

The break-even point for a bull spread is the strike price of the short call option. If the underlying asset price rises above the break-even point, the bull spread will begin to profit.

Bull spreads are often used by investors who are bullish on the underlying asset but do not want to pay a high premium for a call option. Bull spreads can also be used to reduce the cost of a long call position.

Here is an example of a bull spread:

• Buy a call option with a strike price of $50
• Sell a call option with a strike price of $55

The maximum profit for this bull spread is $5, minus the cost of the spread. The maximum loss is the premium paid for the spread, which is $2. The break-even point is $52.50.

If the underlying asset price rises above $55, the bull spread will begin to profit. If the underlying asset price falls below $50, the bull spread will lose money.

Bull spreads are a relatively low-risk options strategy that can be used to profit from a bullish move in the underlying asset. However, it is important to understand the risks involved before entering into a bull spread position.