Bull-Call Debit Spreads...

This a BULLISH strategy, where an investor will sell an At the Money (ATM) or slightly In the Money (ITM) CALL then buy a deeper ITM CALL. Since the CALL that is purchased is deeper ITM, the transaction results in a net debit.

	Sell an At or In the money call and buy a lower strike call. Since the long call is deeper In the Money, the investor will pay a debit.
	This is a bullish strategy as you expect the stock to remain above the short (sold) call strike price.
	In order to realize a profit, an investor must close both legs at or near expiration.
	The maximum risk is the net debit.

	BUY an ITM (In the Money) CALL.
	Sell a Call one or more strike prices above #1 Call in the same month.
	The net investment is the net debit (difference in premiums).
	The maximum risk during bull call spreads is the net debit (difference in premiums).
	The maximum profit is realized if the stock is anywhere above the higher strike price. Maximum profit is equal to the difference in the strike prices minus the net debit.
	The break even point in bull call spreads is the lower strike price (#1) plus the net debit. A profit is realized at any price above the break even point.
	Maximum profit is made when the stock price rises above the highest strike price (#2 CALL).
	Profit is achieved when both legs of the position are liquidated prior to expiration.

The return calculations for the Bull-Call Debit Spread are:

% Return =	Maximum profit / Net Investment
% Return =	(Difference in strike prices - Net Debit) / Net Debit

Where...

Net Debit =	Premium on Bought Call - Premium on Sold Call
Example:	Stock XYZ at $67.93 per share.
	Buy the SEP 60 Call for $9.20
	Write (Sell) the SEP 65 Call for $5.30
% Return =	(Difference in strikes - Net Debit) / Net Debit
% Return =	(65 - 60 - (9.20 - 5.30)) / (9.20 - 5.30) = 1.10 / 3.90 = 28.2%
Max. Risk =	Net Debit = $9.20 - $5.30 = $3.90, if stock is < $60
Max. Profit =	Difference in strikes - Net Debit = 5.00 - 3.90 = 1.10, if stock is > $65
Break Even =	Lower Strike + Net Debit = $60.00 + $3.90 = $63.90

XYZ at exp.	Long 60 CALL	Short 65 CALL	Spread Value	Spread Cost	Net
$70.00	$10,000	$5,000	$5,000	-$3,900	+$1,100
$65.00	$5,000	0	$5,000	-$3,900	+$1,100
$63.90	$3,900	0	$3,900	-$3,900	0
$60.00	0	0	0	-$3,900	-$3,900
$55.00	0	0	0	-$3,900	-$3,900

Profit and Loss values above assume a 10 contract position.

Advantages of the Bull Call Spread Strategy:

	The Bull Call strategy is a BULLISH strategy, the profit can only be realized when the stock price is above the break even point.
	If the stock goes very high gains are limited to the difference in strikes minus the debit.
	Losses are limited to the net debit.
	No stock is actually owned. (uncovered position).
	In the money (ITM) calls offer low break even points, but more limited profits.
	Out of the money calls offer larger profits, but have higher break even points, which require a rise in the price of the stock to realize gains.

Research Tips:

	If you like the risk/reward of the Debit Spread strategy but are bearish: Bear Put Debit Spreads Help
	If you are Bullish on the stock but prefer credit spreads: Bull Put Credit Spreads Help
	For more information on the Parity Strategy to Bull Call Debit spreads: Parity Trading - Option Spreads and Parity Option Trades Revisited