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Bull Call Spread

A Bull Call Spread involves buying a call option at a lower strike price and selling a call option at a higher strike price. It profits from moderate price increases.

  • Ideal for moderately bullish conditions, where a limited price rise is expected.
  • Buying an ATM call and selling an OTM call reduces cost while limiting profit and risk.
  • Risk is capped at the net premium paid, and profit is capped at the difference between the strike prices minus the premium paid.

Example:

  • NIFTY trading at 18,000.
  • Buy 18,000 Call at ₹200 and sell 18,300 Call at ₹100 (lot size = 50).
  • Outcome:
    1. If NIFTY rises to 18,300 at expiry:
      • Gain on bought call = ₹300 × 50 = ₹15,000.
      • Loss on sold call = ₹0.
      • Net profit = ₹15,000 − ₹5,000 (net premium) = ₹10,000.
    2. If NIFTY rises to 18,500 at expiry:
      • Gain on bought call = ₹500 × 50 = ₹25,000.
      • Loss on sold call = ₹200 × 50 = ₹10,000.
      • Net profit = ₹25,000 − ₹10,000 − ₹5,000 = ₹10,000 (capped).
    3. If NIFTY stays below 18,000 at expiry:
      • Both options expire worthless.
      • Net loss = ₹5,000.
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