Ask a Fool: What Are Bull Call Spreads?

A bull call spread is an options strategy that sounds difficult but isn't so tough once you break it down.

"Bull" comes from the fact that the position makes its maximum profit if the stock price finishes above the highest strike price chosen; "call" means that the position consists of a purchased call option (at a lower strike price) and a written call option (at a lower strike price, both at the same expiration date); and "spread" is derived from the fact that the profit potential is primarily determined by the spread between the high strike price and low strike price.

This video explains this premise and addresses the courses of action as expiration nears.

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The article Ask a Fool: What Are Bull Call Spreads? originally appeared on Fool.com.

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