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Using a Bull Call Spread

A bull call spread is an effective trading strategy for bullish market outlooks. It involves buying a call option at a lower strike price while simultaneously selling a call option at a higher strike price, limiting both potential gains and losses. This strategy can be particularly useful for hedging input costs like corn or regaining ownership of commodities sold forward. Learn when to implement a bull call spread and analyze its cost and potential results to optimize your trading strategy effectively.

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Using a Bull Call Spread

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  1. Using a Bull Call Spread

  2. When to Use a Bull Call Spread • When the marketer is bullish on a market up to a point • Hedge an input cost such as corn • Regain ownership of a commodity once the commodity has been sold on the cash market or forward contract

  3. How a Bull Call Spread Works A bull call spread is created by buying a call option at some strike price and simultaneously selling a call option with a higher strike price

  4. Table 1. March KCBT Call Option Premiums

  5. Table 2. Costs to Implement Strategy1 1Assumes no commission charges

  6. Table 3. Bull Call Spread Results1 1Assumes no commission charges

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