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In options trading, a bull spread is a bullish, vertical spread options strategy that is designed to profit from a moderate rise in the price of the underlying security.

Because of put–call parity, a bull spread can be constructed using either put options or call options. If constructed using calls, it is a bull call spread (alternatively call debit spread). If constructed using puts, it is a bull put spread (alternatively put credit spread).

Bull call spread

A bull call spread is constructed by buying a call option with a lower strike price (K), and selling another call option with a higher strike price.

Often the call with the lower exercise price will be at-the-money while the call with the higher exercise price is out-of-the-money. Both calls must have the same underlying security and expiration month. If the bull call spread is done so that both the sold and bought calls expire on the same day, it is a vertical debit call spread.

Break even point= Lower strike price+ Net premium paid

This strategy is also called a call debit spread because it causes the trader to incur a debit (spend money) up front to enter the position.

The trader will realize maximum profit on the trade if the underlying closes above the short strike on expiration.

Bull put spread

A bull put spread is constructed by selling put options with a higher strike and buying the same number of put options with a lower strike on the same underlying security with the same expiration date.^[1] The options trader employing this strategy hopes that the price of the underlying security goes up far enough that the written put options expire worthless.

If the bull put spread is done so that both the sold and bought put expire on the same day, it is a vertical credit put spread.

Break even point = upper strike price - net premium received

This strategy is also called a put credit spread because the trader will receive a credit (be paid the premium) for entering the position.

The trader will realize maximum profit if the underlying closes above the short strike on expiration.

Notes

^ McMillan 2012, p. 319.

References

McMillan, L. G. (2012). Options as a Strategic Investment (5th ed.). Penguin Group.

[1] McMillan 2012, p. 319.

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+{{Short description|Options trading strategy}}
 In options trading, a '''bull spread''' is a [[bullish]], [[vertical spread]] [[options strategy]] that is designed to profit from a moderate rise in the price of the underlying security.
-Because of [[put-call parity]], a bull spread can be constructed using either [[put option]]s or [[call option]]s. If constructed using calls, it is a '''bull call spread'''. If constructed using puts, it is a '''bull put spread'''.
+Because of [[put–call parity]], a bull spread can be constructed using either [[put option]]s or [[call option]]s. If constructed using calls, it is a '''bull call spread''' (alternatively call debit spread). If constructed using puts, it is a '''bull put spread''' (alternatively put credit spread).
 ==Bull call spread==
-A bull call spread is constructed by buying a [[call option]] with a low exercise price, and selling another call option with a higher exercise price.
+A bull call spread is constructed by buying a [[call option]] with a lower strike price (K), and selling another call option with a higher strike price.
-[[Image:BullSpreadCalls.jpg|Payoffs from a bull call spread|thumb|right|300px]]
+[[Image:BullSpreadCalls.jpg|Payoffs from a bull call spread|thumb|left|300px]]
-[[Image:Bull_spread_using_calls.png|thumb|right|300px|A bull spread can be constructed using two call options.]]
+[[Image:Bull spread using calls.png|thumb|right|300px|A bull spread can be constructed using two call options.]]
 Often the call with the lower exercise price will be [[moneyness|at-the-money]]
-while the call with the higher exercise price is [[moneyness|out-of-the-money]].  Both calls must have the same underlying security and expiration month.
+while the call with the higher exercise price is [[moneyness|out-of-the-money]].  Both calls must have the same underlying security and expiration month.  If the bull call spread is done so that both the sold and bought calls expire on the same day, it is a vertical debit call spread.
+Break even point= Lower strike price+ Net premium paid
-===Example===
-Take an arbitrary stock XYZ currently priced at $100. Furthermore, assume it is a standard option, meaning every option contract controls 100 shares.
+This strategy is also called a call debit spread because it causes the trader to incur a debit (spend money) up front to enter the position.
-Assume that for next month, a call option with a strike price of $100 costs $3 per share, or $300 per contract, while a call option with a strike price of $115 is selling at $1 per share, or $100 per contract.
+The trader will realize maximum profit on the trade if the underlying closes above the short strike on expiration.
-A trader can then buy a long position on the $100 strike price option for $300 and sell a short position on the $115 option for $100.  The net debit for this trade then is ''$300 - 100'' = $200.
+{{clear}}
-This trade results in a profitable trade if the stock closes on expiry above $102. If the stock's closing price on expiry is $110, the $100 call option will end at $10 a share, or $1000 per contract, while the $115 call option expires worthless. Hence a total profit of ''$1000 - 200'' = $800.
-The trade's profit is limited to $13 per share, which is the difference in strike prices minus the net debit (15 - 2). The maximum loss possible on the trade equals $2 per share, the net debit.
 ==Bull put spread==
-A bull put spread is constructed by selling higher striking in-the-money put options and buying the same number of lower striking out-of-the-money put options on the same underlying security with the same expiration date. The options trader employing this strategy hopes that the price of the underlying security goes up far enough such that the written put options expire worthless.
+A bull put spread is constructed by selling put options with a higher strike and buying the same number of put options with a lower strike on the same underlying security with the same expiration date.<ref>McMillan 2012, p. 319.</ref> The options trader employing this strategy hopes that the price of the underlying security goes up far enough that the written put options expire worthless.
+If the bull put spread is done so that both the sold and bought put expire on the same day, it is a vertical credit put spread.
-===Example===
-Take an arbitrary stock ABC currently priced at $100. Furthermore, assume again that it is a standard option, meaning every option contract controls 100 shares.
+Break even point = upper strike price - net premium received
-Assume that for next month, a put option with a strike price of $105 costs $8 per share, or $800 per contract, while a put option with a strike price of $125 is selling at $27 per share, or $2700 per contract.
+This strategy is also called a put credit spread because the trader will receive a credit (be paid the premium) for entering the position.
-A trader can then buy a long position on the $105 strike price option for $800 and sell a short position on the $125 option for $2700.  The net credit for this trade then is ''$2700 - 800'' = $1900.
+The trader will realize maximum profit if the underlying closes above the short strike on expiration.
-This trade results will be profitable if the stock closes on expiry above $106. If the stock's closing price on expiry is $110, the $105 put option will expire worthless while the $125 put option will end at $15 a share, or $1500 per contract. Hence a total profit of ''$1900 - 1500'' = $400.
+==See also==
-The trade's profit is limited to $19 per share, which is equal to the net credit. The maximum loss on the trade is $1 per share while is the difference in strike prices minus the net debit (20 - 19).
+* [[Ladder (option combination)]]
+==Notes==
+{{reflist}}
 ==References==
+* McMillan, L. G. (2012). ''Options as a Strategic Investment'' (5th ed.). Penguin Group.
-* {{cite book
- | last = McMillan| first = Lawrence G.
- | title = Options as a Strategic Investment
- | edition = 4th ed.
- | publisher = New York : New York Institute of Finance
- | year = 2002
- | isbn = 0-7352-0197-8
- }}
+[[Category:Options (finance)]]
+[[Category:Derivatives (finance)]]
 {{Derivatives market}}
-[[Category:Options]]
-[[Category:Derivatives]]
-[[pl:strategia byka]]