A bull call spread is a “vertical spread” strategy that consists of buying a call option while also selling another call option at a higher strike price (same quantity and expiration).
- Buy the 100 call expiring in June
- Sell the 110 call expiring in June
In this case, the trade is the 100 / 110 bull call spread in June.
The trader who buys this spread hopes the stock price rises to $110 or above before June expiration.
If the stock price remains below $100 through the expiration in June, the trader will lose the entire premium paid for the call spread. For example, if the trader paid $5.00 for the spread, the maximum loss potential is $500 at expiration if the stock price is below $100:
$5.00 Premium Paid x $100 Contract Multiplier = $500 Maximum Loss Per Spread.
There’s a ton more you need to know about bull call spreads. For a full understanding of bull call spreads and the three other vertical spread strategies, read my comprehensive guide on trading vertical spreads.
I hope this helps!