Bull Call Spread
Buy a lower-strike call and sell a higher-strike call — a leveraged bullish bet with limited loss.
Bull call spread: buy call(K1) + sell call(K2), where K1 < K2 < S. Net debit = C(K1) − C(K2). Maximum profit = K2 − K1 − net debit (when S > K2). Maximum loss = net debit (when S < K1). Breakeven = K1 + net debit. Compared to buying a naked call, the spread reduces cost (and profit potential). CFA also covers bear put spreads (buy higher put, sell lower put) as the mirror bearish version.
Related Terms
Delta (Δ)
The sensitivity of an option's price to a $1 change in the underlying spot price.
Black-Scholes-Merton Model (BSM)
The foundational option pricing formula that gives the fair value of a European call or put as a function of spot, strike, rate, volatility, and time.
Straddle
Buying a call and a put at the same strike — profits from a large move in either direction.