Vertical spreads
What is a Bull Call Spread (Debit Call Spread) and how does it limit risk while capping reward?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A bull call spread involves buying a call at a lower strike and selling a call at a higher strike with the same expiration, reducing net cost compared to a single long call while capping both maximum profit and maximum loss at defined levels.
How it works
The premium collected from the short call partially offsets the cost of the long call, lowering the breakeven point compared to buying the call alone, in exchange for giving up gains above the short strike.
An example
Buying a $50 call for $3 and selling a $55 call for $1 creates a net $2 debit spread, with maximum profit capped at $3 if the stock closes at or above $55.
Risk & limitations
OIC notes maximum loss is limited to the net premium paid, but the position still requires a sufficient upward move to reach breakeven before expiration.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.