Bull spread

1. Options speculation. A composite speculative deal in two options, which results in a profit/loss profile similar to a conventional call option, except that the upside potential is capped in return for a reduction in the net premium payable.

A bull spread can be constructed using call options by buying a call with a given strike price, and selling an otherwise identical call with a higher strike price. It can also be constructed using appropriate put options.

2. Hedging with options. A composite transaction in two options plus an underlying asset, resulting in the same profit/(loss) profile as the deal described in 1. above.

See also

• Bear spread
• Bull
• Call option