Bull Call Spread Strategy with Example

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Bull Call Spread Strategy with Nifty Example

The Bull Call Spread is a popular moderately bullish options strategy used when you expect the market to rise gradually, but not aggressively.

It is a limited risk, limited reward strategy, making it suitable for traders who want controlled exposure with reduced cost compared to a simple long call.

What Is a Bull Call Spread?

A Bull Call Spread involves:

  • ✅ Buying one Call Option (lower strike price)

  • ✅ Selling another Call Option (higher strike price)

  • ✅ Same expiry date

This strategy reduces the cost of buying a call option because the premium received from selling the higher strike call offsets part of the purchase cost.

When to Use a Bull Call Spread?

You should use this strategy when:

  • 📈 You expect the market to move moderately upward

  • 📊 Market is in a range-bound to slow bullish trend

  • 💰 You want limited risk

  • 💵 You are comfortable with capped profit

It is ideal for traders who believe the market will rise to a certain level but not beyond that level.

Example: Nifty Bull Call Spread (February Expiry)

Let’s understand with a practical example in Nifty:

  • Buy Nifty Feb 25500 CE @ ₹120

  • Sell Nifty Feb 25700 CE @ ₹40

Step 1: Calculate Net Premium Paid

Net Premium = 120 – 40 = ₹80

So, your total investment (maximum risk) is ₹80 per lot.

Payoff Structure

1️⃣ Maximum Loss

Maximum Loss = Net Premium Paid
= ₹80

This happens if Nifty expires at or below 25500.

2️⃣ Maximum Profit

Difference between strike prices = 25700 – 25500 = 200

Maximum Profit = Spread – Net Premium
= 200 – 80
= ₹120

This happens if Nifty expires at or above 25700.

3️⃣ Break-even Point

Break-even = Lower Strike + Net Premium
= 25500 + 80
= 25580

Nifty must close above 25580 to start making profit.

Payoff Scenario Table

Nifty Expiry LevelResult
Below 25500₹80 Loss
25580No Profit No Loss
25650Partial Profit
Above 25700₹120 Maximum Profit

Why Use Bull Call Spread Instead of Long Call?

Long CallBull Call Spread
          Higher Cost        Lower Cost
   Unlimited Profit      Limited Profit
Higher Risk (premium paid)     Lower Risk
Best for Strong Bullish   Best for Moderate Bullish

If you are a disciplined trader who prefers controlled risk (especially in range markets), this strategy is very effective.

Advantages

✔ Limited Risk
✔ Lower Capital Requirement
✔ Better Risk-Reward for Moderate Move
✔ Time Decay Impact is Reduced

Disadvantages

✘ Profit is capped
✘ Not suitable for strong breakout markets
✘ Requires correct strike selection

Final Conclusion

The Bull Call Spread is an excellent strategy for moderate bullish market conditions.

In the above example:

  • Maximum Loss = ₹80

  • Maximum Profit = ₹120

  • Break-even = 25580

If you expect Nifty to move between 25500–25700 range, this strategy provides a smart and cost-effective bullish position with controlled risk.

#OptionsTrading #Nifty #OptionsStrategy #StockMarketIndia #DerivativesTrading

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