Finschool By 5paisa

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An option strategy known as a “bull call spread” is buying a call option and simultaneously selling another option with the same expiration date but a higher strike price. One of the four fundamental varieties of price spreads, also known as “vertical” spreads.

In a bull call spread, the premium earned for the call sold is always more than the premium paid for the call purchased (which makes up the long call leg) (the short call leg). As a result, a bull call spread strategy is often referred to as a debit call spread because it requires an initial investment, or “debit” in trading jargon.

A portion of the cost of the purchased call is offset by selling or writing the call at a lower price. As seen in the example below, this decreases the position’s overall cost but also caps its potential reward.

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