A bull call spread involves buying a call option at a lower strike price and selling a call option at a higher strike price. This strategy:

• Has defined maximum risk and reward
• Costs less than buying a single call option
• Profits when the stock rises above the lower strike
• Maximum profit is capped at the higher strike

On Lloyds Bank trading at £0.45/share, you create a bull call spread:

• Buy call at £0.45 strike for £0.03 premium
• Sell call at £0.50 strike for £0.01 premium
• Net cost: £0.02/share
• Maximum profit: £0.03/share (£0.05 spread - £0.02 cost)

If Lloyds rises above £0.50, you make the maximum profit. If it stays below £0.45, you lose the net premium paid.

• Moderately bullish on a stock
• Want to limit risk compared to buying calls
• Expect stock to rise but not dramatically
• Want to reduce the impact of time decay

• Maximum loss is limited to net premium paid
• Maximum profit is capped at the spread width minus cost
• Early assignment possible on short call
• Requires margin for the spread