Options trading strategy: Bull Call Spread

 In Bull Call Spread, you will buy a ATM CALL and sell OTM CALL. Bull call spread is used when you expect a moderate (not huge) increase in the price of the underlying instrument. Suppose TATA MOTORS is trading at 304.00. You may enter a bull call spread if you think there will be a moderate rise in the stock price. You enter a bull call spread in following way

1) BUY CALL @ ATM

2) SELL  CALL @ OTM

The BUY give you returns if the stock move as expected and the SELL will give you the protection if the price decreases.

As you can see from the below table the maximum profit and maximum loss is capped to 12 and 8 respectively.

MINIMUM QUANTITY TO PARTICIPATE	5700
SPOT PRICE (RS)	308
BUY CALL ATM @310	15
SELL CALL OTM@330	8
NET PREMIUM (DEBIT)	7
WHEN SPOT PRICE IS 300
300 - 310 (BUY IS WORTHLESS)	-15
300-330 (WE RETAIN THE PREMIUM COLLECTED	7
	-8	x5700
WHEN SPOT PRICE IS 310
310 - 310 (BUY IS WORTHLESS)	-15
310-330 (WE RETAIN THE PREMIUM COLLECTED	7
	-8	x5700
WHEN SPOT PRICE IS 328
328 - 310 (BUY IS WORTH SOMETHING)	3	18-15(PREMIUM)
328-330 (WE RETAIN THE PREMIUM COLLECTED)	7
	10	x 5700
WHEN SPOT PRICE IS 340
340 - 310 (BUY IS WORTH SOMETHING)	15	30-15(PREMIUM)
340-330 (SELL IS WORTHLESS)	-3	x 5700
	12
WHEN SPOT PRICE IS 360
360 - 310 (BUY IS WORTH SOMETHING)	35	50-15(PREMIUM)
360-330 (SELL IS WORTHLESS)	-23	30-7 (PREMIUM COLLECTED)
	12	x 5700
WHEN SPOT PRICE IS 400
400 - 310 (BUY IS WORTH SOMETHING)	75	90-15(PREMIUM)
400-330 (SELL IS WORTHLESS)	63	70-7 (PREMIUM COLLECTED)
	12