|
Bull call spreads have their place. I look at them as a slightly hedged alternative to a long call. They are a pure directional trade. In certain instances, a bull call spread is a more desirable strategy over buying a long call because there is greater potential for return on a percentage basis.
To put on a bull call spread, you buy an option at a low strike price which is always the more expensive option, and sell an option with a higher strike price which is always the cheaper option. Since you're buying something expensive and selling something cheap, the bull call spread always ends up costing you money. Thus, it will always be classified as a debit spread which results in a charge to your account for the trade.
As with every other option strategy, there are variations to consider based on the moneyness of the option.
|
