Bull Call Option Screener

Hi, and welcome to the Options Learning Center. I'm going to show you how to buy bull call spreads and use Barchart to get the most out of the strategy.

What Is A Bull Call Debit Spread?

A bull call spread, also known as a call debit spread, is a vertical spread options strategy that involves purchasing a call option that is close to or at-the-money, while simultaneously selling a call option with a higher strike price on the same underlying asset and expiration date. This results in a net debit, which is what you pay to enter the trade.

• Vertical Spread Strategy
• Buy ITM Call: Pay premium
• Sell OTM Call (Higher Strike): Receive premium
• Net Debit: Difference in premiums

The goal of the trade is for the underlying stock price to be above the short call at expiration, leading to both options expiring in the money. If that happens, investors can close out the trade at a profit.

Bull Call Spread Goal

• The underlying price is above the short call
• You profit when both options in the money
• You close the trade for profit

Bull call spreads allow traders to participate in an upside price movement of the underlying asset, while limiting the cost of entry. The maximum loss is limited to the difference between the premium paid and received, otherwise known as the net debit. The maximum profit is limited to the difference between the two strike prices (the width of the spread), less the premium paid.

• Max Loss: Net debit paid
• Max Profit: Spread width minus debit
• Reduces risk of loss
• Participates in the increase of the underlying
• Both options must expire ITM

Trade Examples

Using Barchart, you can look for bull call spreads. Here's how.

Screening The Market For Potential Bull Call Trades

Bull call spreads are best used if you are moderately bullish on the market. All that's left is finding the right underlying asset.

To get started, simply navigate to Barchart.com, click on the Options tab, and then click on the Bull Call Option Screener. You will be brought to a Results page, where important information like bid/ask prices, premiums, trade leg details, max profit and losses, and ITM Probability will be displayed. These are all essential to trading bull calls.

Most of the information you see on this page is enough to get a bull call trade started. However, if you want to customize your results further, click the Set Filters tab.

Customizing the Screener

You may prefer to tailor-fit your screener to reflect different strategies and risk profiles.

You can select from dozens of filters, such as option details, analysis, and even underlying stock information. There are a few default filters here, but you can add or remove whatever you need from them.

Most important is the ITM Probability filter. ITM probability is an excellent measure of profitability because the maximum profit for a bull call spread happens when the underlying's stock price goes even 1 cent above the short call's strike. Just remember that higher ITM probabilities mean lower profits since there's less risk.

For this example, let's use 50% here, which balances safety and profit.

Once your filters are set, click the See Results button.

Now you have a list of potential trades.

I want to pick a result with a high probability of expiring in the money. You can sort them by clicking on any column heading. For example, clicking on the ITM Probability column header will arrange the list from highest to lowest probability.

For this example trade, let's look at this one for Microsoft (MSFT) as the underlying asset.

The screener suggests buying a call with a $430 strike for $28.05 and then selling a call with a $435 strike, collecting $24.45. That results in a net debit of $3.60 and a potential max profit of $1.40. The trade expires on September 20, 2024, and has a 57.64% chance of expiring in-the-money.

Now that we have our trade details, let's discuss the potential results.

Bull Call Expires In The Money (Profit)

Fast forward to September 20, and Microsoft is trading at $450, above your $435 short strike. That means the trade is in-the-money and at its maximum profit condition.

To calculate the maximum profit, simply take the difference between the strike prices, then subtract the net debit. For this trade, that's $1.40 per share, or $140 per contract.

$435 - $430 = $5 - $3.60 = $1.40

Bull Call Expires Out Of The Money (Loss)

On the other hand, if Microsoft's price goes below the $430 long strike, say to $425, the trade is out of the money and is at its maximum loss condition.

The maximum loss for a bull call spread is the net debit paid at the start of the trade, calculated by subtracting the received premium from the paid premium. So, that's $3.60 per share or $360 per contract.

$28.05 - $24.45 = $3.60

Profit/Loss Across Different Price Points

Now, here's how the trade would look like if Microsoft's stock trading price moves up or down through expiration.

Let's start by calculating the breakeven price. To get that, add the net debit to the long or lower strike. So, for this trade, that's $433.60.

$430 + $3.60 = $433.60

As you can see, as long as Microsoft stock trades above the breakeven point of $433.60 at expiration, there'll be some money left at the end of the trade.

And if it goes above $435, no matter how high, you'll get a net profit of $140.

Same on the downside. Anything below the breakeven point results in a loss, to a maximum of $360 on this trade.

Screening For Bull Calls Using a Specific Underlying Asset

If you want to search for bull call trades with a specific underlying asset in mind, all you need to do is go to the stock or asset's Price Overview page on Barchart.com. Once there, look at the menu on the left and click Vertical Spreads under the Options Category.

Click on the Bull Call tab.

You can change the expiration date by clicking on the Expiration drop-down.

Let's say you have a specific strike price in mind. You may also change which trades to review based on the strike prices. To do that, use the Show Only dropdown and select from Leg 1 (the long call strike) or Leg 2 (the short call strike). Then, indicate the price you want to view in the Strike field, and click apply.

To further customize your trade, click on screen at the top-right of the page. This takes you to the Bull Call Options Screener, selecting only your symbol's options expiring on the selected date, with the selected strikes.

Assignment Risks

Since a bull call involves selling an option, you also face the risk of early assignment.

Usually, options are exercised at expiration, but there are exceptions. Early assignment happens when the short option is exercised before the expiration date. And, this only happens with American-style options.

• Options are normally exercised at expiration
• Early assignment: the short option is exercised before the expiration date
• Early Assignment Risk: with American Options

Since you'll want the short call to be in the money at or before expiration, you face an elevated risk of early assignment.

So, what happens if you are assigned?

If your short call is assigned, you'll be required to sell 100 shares of Microsoft for $435 each. But remember that since you're holding a long call for the same asset, you can also exercise it and buy 100 MSFT shares for $430 each, regardless of the price the stock currently trades at.

That closes out your trade a bit early, and you'll end up with a $5 per share profit on the assignment, minus the initial premium paid, which works out to $1.40 a share or $140 per contract profit.

• Buy 100 Shares of MSFT @ $430/ea
• Sell 100 Shares of MSFT @ $435/ea
• Gross Profit: $5
• Initial Premium (Debit): $3.60
• Net Profit: $1.40 (or $140 per contract)

Pros & Cons

Bull calls have several advantages.

The strategy has a defined risk and reward ratio, which is great for risk-averse investors or those trading with small accounts.

It's also more cost-effective than buying a long call outright and best used when you expect the asset to undergo moderate price increases within your chosen expiration date.

• Defined Profit/Loss
• Cost-Effective
• Profit from Moderate Increases

But, as they say, there's no such thing as a free lunch, so let's go over the disadvantages.

First, of course, it has limited profit potential. Your profit is capped from the get-go, meaning your maximum profit is the maximum you could collect on the trade.

It is also more complex than single-leg trades, so it might be a more difficult for beginners to initiate or monitor the trades.

Finally, bull calls result in a debit, which means you'll pay to get into the trade, plus any trading costs.

• Limited Profit Potential
• Complexity
• Debit And Added Costs

Conclusion

Bull calls work well in moderately bullish markets. Their defined profit and loss points are excellent for risk management.

However, it requires precise market timing and price movement, so your best bet is to trade using an option screener to increase your chances of success. Always use tools and resources like the Barchart's Bull Call Option Screener and supplement your trading knowledge through the Barchart Options Learning Center.