Risk and Reward
A bull call spread limits your maximum loss to the net premium paid—the difference between what you spend buying the lower strike call and receive selling the higher strike call. Your maximum profit equals the difference between strike prices minus this net cost. If you buy a £1.80 call for £0.15 and sell a £2.00 call for £0.05, your net cost is £0.10 per share, capping your loss at £0.10 while allowing gains up to £0.10 (a 100% return on your outlay).
Three outcomes emerge at expiry. If the underlying asset falls below your lower strike, both options expire worthless and you lose the net cost. If it settles between the two strikes, you profit on the difference minus your net cost. If it rises above the higher strike, you capture your maximum gain.
UK Tax Treatment
Capital Gains Tax
Bull call spread profits fall under capital gains tax. Basic-rate taxpayers pay 18% CGT, while higher-rate taxpayers pay 24% (2025/26 rates). A £100 profit triggers a £18 tax bill for basic-rate earners.
The annual CGT allowance for 2025/26 is £3,000. Gains below this threshold incur no tax. Any amount above it becomes taxable—so £4,000 in gains means you pay tax on £1,000.
HMRC Guidance
HMRC classifies options trading profits and losses as capital gains and losses in their Capital Gains Tax manual. The manual outlines calculation methods and reporting requirements for your tax return.
Consult HMRC guidance and professional tax advice to meet your obligations. Unreported gains can trigger penalties up to £3,000.
Practical Examples
Consider a bull call spread on a FTSE 100 stock. You buy a £50 call and sell a £55 call, both expiring in 3 months. If the stock reaches £52 at expiry, your profit is £2 minus £0.10 net cost, yielding £1.90 per share—a 19% return on your outlay.
In a commodity example, you buy a £1,200 call and sell a £1,300 call, both expiring in 2 months. If the commodity settles at £1,250, you profit £50 minus £10 net cost, generating £40 per unit and a 40% return on your capital deployed.