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Bull call spread

Buy a call and sell a higher-strike call in the same expiration; a bullish debit trade with capped profit and loss limited to the debit.

Payoff of a bull call spread at expiryA flat loss below the lower strike, a rising middle section, and a flat capped profit above the upper strike.Profit / loss per share08895115122100110buy the 100 callsell the 110 callBreakeven 103Max profit 7capped above 110Max loss 3 — the net debitUnderlying price at expiry
Vertical spread: payoff at expiry. Buying the 100 call and selling the 110 call costs 3 net. Below 100 that 3 is the whole loss; above 110 the gain stops at 7, because the sold call gives back every dollar the bought call earns beyond 110.

The short call pays for part of the long call, which lowers the breakeven-price compared with buying the call outright and removes most of the vega exposure. What you give up is everything above the short strike.

It is the structure to use when you have a price target rather than a hope. Setting the short strike at the target converts an open-ended bet into a defined one, and the max-profit is simply the spread-width minus the net-debit.

Example: XYZ at $50. Buy the 45-day $50 call at $2.30, sell the $55 call at $0.80, for a $1.50 debit. Max loss $150 per spread, max profit $350 at or above $55, breakeven $51.50. The naked $50 call would need $52.30 just to break even.

Related: debit-spread, bear-call-spread, vertical-spread, max-profit

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