What is a 'Bull Spread'
A bull spread is a bullish, vertical spread options strategy designed to profit from a moderate rise in the price of the underlying security. It's comprised of the simultaneous purchase and sale of either call options or put options with different strike prices but with the same underlying asset and expiration date. Regardless of options type, the lower strike price is bought and the higher strike price is sold.
If the strategy uses call options, it is called a bull call spread. If it uses put options, it is called a bull put spread.
BREAKING DOWN 'Bull Spread'
A bull call spread is also called a debit call spread because the trade generates a net debit to the account when it is opened. The option purchased costs more than the option sold.
A bull put spread is also called a credit put spread because the trade generates a net credit to the account when it is opened. The option purchased costs less than the option sold.
The practical difference between the two is the timing of the cash flows. For the bull call spread, you pay upfront and seek profit later when it expires. For the bull put spread, you collect money up front and seek to hold on to as much of it as possible when it expires.
Bull Call Spread Mechanics
Since a bull call spread involves writing call options that have a higher strike price than that of the long call options, the trade typically requires a debit, or initial cash outlay. The maximum profit in this strategy is the difference between the strike prices of the long and short options less the net cost of the options  the debit. The maximum loss is only limited to the net premium (debit) paid for the options.
A bull call spread's profit increases as the underlying security's price increases up to the strike price of the short call option. Thereafter, the profit remains stagnant if the underlying security's price increases beyond the short call's strike price. Conversely, the position would have losses as the underlying security's price falls, but the losses remain stagnant if the underlying security's price falls below the long call option's strike price.
Bull Put Spread Mechanics
Since a bull put spread involves writing put options that have a higher strike price than that of the long call options, the trade typically generates a credit at the start. The maximum profit using this strategy is equal to the amount received as a credit. The maximum loss a trader can incur when using this strategy is equal to the difference between the strike prices minus the net credit received.
Both strategies achieve maximum profit if the underlying asset closes at or above the higher strike price.
Both strategies result in maximum loss if the underlying asset closes at or below the lower strike price.
Breakeven, before commissions, in a bull call spread occurs at (lower strike price + net premium paid).
Breakeven, before commissions, in a bull put spread occurs at (upper strike price  net premium received).

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