What Are Bull Call Spread and Bear Put Spread Strategies

Short answer: A bull call spread is a defined-risk bullish strategy, and a bear put spread is a defined-risk bearish strategy; both involve buying one option and selling another to cap cost, profit, and loss.

The Bull Call Spread

A bull call spread is used when you expect a moderate rise in the underlying. You buy a call at a lower strike and simultaneously sell a call at a higher strike with the same expiry. The premium received from the sold call reduces the net cost of the bought call.

How the Bull Call Spread Pays Off

Your maximum profit is capped at the difference between the two strikes minus the net premium paid, achieved if the underlying rises above the higher strike. Your maximum loss is limited to the net premium paid. You trade away some upside in exchange for lower cost and defined risk.

The Bear Put Spread

A bear put spread is the mirror image for a bearish view. You buy a put at a higher strike and sell a put at a lower strike with the same expiry. The sold put lowers the net cost, and you profit if the underlying falls.

How the Bear Put Spread Pays Off

Maximum profit is the difference between the strikes minus the net premium, achieved if the underlying falls below the lower strike. Maximum loss is the net premium paid. Again, you cap both profit and loss for a cheaper, controlled position.

Why Use Spreads

Spreads are popular because they have defined, known risk and a lower cost than buying a single option outright. They also reduce the impact of time decay and volatility compared with a naked long option, making them more forgiving for directional views.

Practical Notes

Spreads suit moderate, not explosive, moves, since your upside is capped at the higher strike. They are a sensible step up for traders who understand single options and want defined-risk directional trades. Always calculate your maximum profit, maximum loss, and break-even before entering, and account for costs.

This explainer was written by The Dispatch desk to answer a question readers commonly ask. It is general information, not personalised financial advice.