When to use Bull Call Spread in Option trading?
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stay away from options trading, stick to stock trading, learn and then earn
Hey @Dhruba, Don’t listen to naysayers, test it out with a smallish position and see for yourself if it works for you.
This strategy is the covered variant of just buying a long call. That ultimately limits your risk but to get the reduction in risk, you’re going to have to sacrifice some potential profit. Which is completely fine.
You usually go for Bull Call spread when you feel the underlying has bottomed out i.e you feel this is the lowest it will go for some time, you believe there is upside from here but don’t have a strong target in mind.
You want the stock/Index to be at or above the higher strike at expiration, but not so far that you’re disappointed you didn’t simply buy a call on the underlying stock. But even if that does happen hey, you played it smart and made some profit.
To get the maximum value of a bull call spread it is usually done when it’s close to expiration.
Disclaimer : Only trade this strategy when you are completely thorough with what you are trying to do. If not as Ravi said, it would be recommended you use some good resources to understand the trade setup completely.
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