Spread Parameters

$
Current stock price at trade entry
$
Strike of the call you buy (lower)
$
Strike of the call you sell (higher)
Short call strike must be greater than long call strike.
Calendar days remaining
%
Annualized implied volatility (same for both legs)
$
$
%
Annualized risk-free rate
%
Annualized dividend yield
Each contract = 100 shares per leg

Bull Call Spread Quick Reference

P/L at Expiration:

P/L = max(S - K1, 0) × 100 × Qty

     - max(S - K2, 0) × 100 × Qty

     - Net Debit

Key Terms:

  • S = Stock price at expiration
  • K1 = Long call strike (lower)
  • K2 = Short call strike (higher)
  • Breakeven = K1 + Net Debit per share
  • Max Profit = (K2 - K1) × 100 × Qty - Net Debit
  • Max Loss = Net Debit

Key Metrics

Net Debit --
Max Profit --
Max Loss --
Breakeven --
Long Call Premium --
Short Call Premium --

Formula Breakdown

P/L = max(S - K1, 0) × Qty × 100 - max(S - K2, 0) × Qty × 100 - Net Debit
Breakeven = K1 + Net Debit per share

P/L Diagram

Ryan O'Connell, CFA
CALCULATOR BY
Ryan O'Connell, CFA
CFA Charterholder & Finance Educator

Finance professional building free tools for options pricing, valuation, and portfolio management.

About YouTube

Understanding Bull Call Spreads

Video Explanation

Video: Bull Call Spread Explained

What Is a Bull Call Spread?

A bull call spread (also called a long call spread or call debit spread) is an options strategy that involves buying a call option at a lower strike price (K1) and simultaneously selling a call option at a higher strike price (K2), both with the same expiration date.

This strategy expresses a moderately bullish view: you profit if the stock rises above your breakeven, but both your profit and loss are capped. It is a net debit trade because the long call (lower strike) costs more than the credit received from the short call (higher strike).

Key Characteristics

  • Max Profit: Limited to (K2 - K1) × 100 × Qty - Net Debit. Occurs when S ≥ K2 at expiration.
  • Max Loss: Limited to the Net Debit (entry cost). Occurs when S ≤ K1 at expiration.
  • Breakeven: K1 + Net Debit per share
  • Outlook: Moderately bullish
  • Cost: Net debit (you pay to enter because the long call costs more than the short call credit)
  • Time Decay: Mixed effect — hurts the long leg, helps the short leg

How to Read the P/L Chart

The solid blue line (At Expiration) shows three distinct regions: a flat loss region below K1 (you lose the full net debit), a rising profit/loss line between K1 and K2, and a flat profit region above K2 (max profit is capped).

The dashed dark blue line (Today / T+0) represents the theoretical P/L at trade entry using Black-Scholes for both legs. The smooth S-curve shows how the spread value changes with the stock price before expiration.

IV Mode vs. Premium Mode

IV Mode: Enter a single implied volatility, and the calculator uses Black-Scholes to estimate both the long call and short call premiums. This mode also enables the "Today (T+0)" P/L curve on the chart.

Premium Mode: Enter the exact premiums for both legs. Useful when you know the actual market prices. Only the expiration payoff curve is shown because IV is needed to compute theoretical values before expiration.

When to Use a Bull Call Spread

  • You have a moderately bullish outlook on the stock
  • You want to reduce the cost of a long call by selling a higher-strike call
  • You are willing to cap your upside in exchange for a lower entry cost
  • You want defined risk — both max profit and max loss are known at entry
Model Assumptions: This calculator uses the Black-Scholes model with the same implied volatility for both legs. In practice, different strikes may have different IVs (volatility skew). The model assumes European-style options, constant IV, continuous dividend yield, and a constant risk-free rate.

Frequently Asked Questions

A bull call spread (also called a long call spread or call debit spread) involves buying a call option at a lower strike price and simultaneously selling a call option at a higher strike price, both with the same expiration date. It is a net debit strategy that profits from a moderate rise in the underlying stock price. Both maximum profit and maximum loss are defined at entry, making it a defined-risk strategy.

The maximum profit is (Higher Strike - Lower Strike) × 100 × Number of Contracts minus the Net Debit paid. This occurs when the stock price is at or above the higher strike at expiration. The maximum loss is limited to the Net Debit (entry cost), which occurs when the stock price is at or below the lower strike at expiration. Both outcomes are known before entering the trade.

The breakeven price is Lower Strike Price + Net Debit per share. The Net Debit per share is the premium paid for the long call minus the premium received for the short call. At the breakeven stock price at expiration, the intrinsic value of the spread exactly equals the net cost of entry, resulting in zero profit or loss.

Implied volatility (IV) affects both legs of the spread. Higher IV increases both the long call and short call premiums, but the long call (lower strike, higher delta) is generally more sensitive to IV changes. This means the net debit typically increases with higher IV, making the spread more expensive to enter. This calculator uses a single IV for both legs; in practice, different strikes may have different IVs due to volatility skew.

Use IV mode when you want the calculator to estimate both call premiums using Black-Scholes with a single implied volatility. This also enables the T+0 (today) P/L curve on the chart. Use premium mode when you know the exact market prices for both legs and want to see the expiration payoff based on those known costs.

Use a bull call spread when you are moderately bullish and want to reduce the cost of a long call by selling a higher-strike call against it. The spread has a lower entry cost and smaller maximum loss than a standalone long call, but your profit is capped at the width of the strikes minus the net debit. A long call is preferable when you expect a large upward move and want unlimited profit potential.

This calculator uses the Black-Scholes model, which assumes European-style options (exercisable only at expiration). The expiration P/L diagram is identical for American and European call spreads on non-dividend-paying stocks. For dividend-paying stocks, the short call leg may face early assignment risk near ex-dividend dates, which could change the actual outcome versus the theoretical model.
Disclaimer

This calculator is for educational purposes only. Options trading involves significant risk of loss. Actual option prices and P/L may differ due to market conditions, bid-ask spreads, dividends, early exercise (American options), and other factors. The Black-Scholes model makes simplifying assumptions including constant volatility, a single IV for both strikes, and European-style exercise. This is not financial advice. Consult a qualified professional before making investment decisions.

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