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A bull call spread, also called a vertical spread, involves buying a call option at a specific strike price and simultaneously selling another call option at a higher strike price.

Both call options use the same underlying investment and expiration date.

Suppose an investor believes ABC Corporation’s stock values are going to experience a modest climb. The stocks currently sell for $50 per share.

The investor buys five call option contracts with a $52 strike price for $1 each. The investor simultaneously sells five call option contracts with the same expiration at a $55 strike price for 50 cents each. The investor has spent $250, since each option contract represents 100 shares.

The stock’s value climbs to $56 per share. Both strike prices are in the money, or less than the market price. The investor exercises the $52 option to buy 500 ABC shares for $26,000, and then sells them for $27,500, as required by his $55 option. The investor has profited $1,250 on the spread, minus the initial outlay.

If the stock’s value had climbed to $54, only the $52 option would be in the money. The $55 option would be out of the money and therefore worthless.

If the stock had fallen to $49, both options would be out of the money and worthless.

A bull call spread sacrifices some profit to limit risk to the initial premium, it's not a wise strategy for stocks expected to experience substantial gains. 

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