Option Play Book - Bull Call Spread

The speaker walks through an example of a bull call spread options strategy.  This is a bullish strategy which involves buying a call option and shorting a call with a higher strike price.  The strategy should be used when you have a bullish opinion on the market but do not know how high it will go.  Alternatively, it is employed when a trader believes that the market will move higher but does not want pay high premium for just a long call option.

The maximum profit potential on this trade is equal to the difference between the two strike prices of the options that are selected.  Conversely, the risk on the trade is equal to the net debit.  If the stock is below the long call option strike price at expiration, the maximum loss, equal to the risk of the trade, will be achieved.  Finally, the breakeven point of this trade is equal to the strike price of the long call option plus the net debit paid for initiating the spread. 

A live trading example using a bull call spread is illustrated in this video.
Tim Ord
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