Bull call spread
Buy a call, sell a higher call. Cheaper than a naked call, closer breakeven, capped profit.
The idea
You're bullish, but realistic: you think NIFTY can get to around 22,600 in two weeks, not to the moon. A naked 22400 call costs ₹256.20 — and much of that price pays for upside beyond 22,600 that you don't expect.
So you sell that upside to someone else:
| Leg | Action | Option | Price |
|---|---|---|---|
| 1 | Buy | 22400 CE | ₹256.20 |
| 2 | Sell | 22600 CE | ₹163.55 |
| Net debit | ₹92.65 |
The payoff
If NIFTY ends at 22,400, you lose ₹6,022.
| NIFTY at expiry | 22400 CE leg | 22600 CE leg | Net P&L (1 lot) |
|---|---|---|---|
| 22,200 | −256.20 | +163.55 | −₹6,022.25 |
| 22,400 | −256.20 | +163.55 | −₹6,022.25 |
| 22,500 | −156.20 | +163.55 | +₹477.75 |
| 22,600 | −56.20 | +163.55 | +₹6,977.75 |
| 23,000 | +343.80 | −236.45 | +₹6,977.75 |
Why does profit stop at 22,600? Above that, every extra rupee the bought call earns, the sold call loses. They cancel out.
Spread vs naked call
Naked 22400 CE
- Costs ₹16,653 per lot.
- Breakeven 22,656.20.
- Unlimited profit.
- Full exposure to theta and IV crush.
22400/22600 bull call spread
- Costs ₹6,022 — about 64% less.
- Breakeven 22,492.65 — 163 points closer.
- Profit capped at ₹6,978.
- The sold call offsets much of the theta and vega.
The spread wins at moderate moves. If NIFTY ends at 22,600, the spread makes ₹6,978 while the naked call makes only (200 − 256.20) × 65 = −₹3,653 — a loss. The naked call only pulls ahead above about 22,763.
Choosing strikes
- Wider spread (e.g. 22400/22800): costs more, bigger max profit, needs a bigger move.
- Narrower spread (e.g. 22400/22500): cheap, small profit, high odds.
- ITM/OTM placement: buying an ITM call and selling an ATM call gives a higher chance of profit but a smaller payoff ratio.
Quick check
Your 22400/22600 bull call spread cost ₹92.65. NIFTY expires at 22,550. Profit per unit?