Important notice
The information on this web site is provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Trading in stocks and options involves risk. You can lose money. You should always seek professional advice from your stock broker. We are not stockbrokers and do not make recommendations to buy or sell any stock or option. We provide educational information for your evaluation.

Return to Option Strategies

With the bull call debit we look for a stock that is in an up trend.

We will buy a call option in the money.

We write a call option out of the money.

We use the same number of contracts; each contract is equal to 100 shares.

XYZ stock is trading at 21.00

• We buy the Aprils 20.00 strike price options for 2.00 (200.00)
• We write the Aprils 22.50 strike price options for 1.00 (100.00)
• We invested 2.00 and received a premium credit of 1.00 we have a debit of -1.00. (-100.00)

XYZ stock moves up to 24.00 by expiration date

• We buy a call with the strike price at 20.00 this gives us the right to call out the XYZ shares at 20.00
• because we wrote a call at 22.50 we have the obligation to provide the XYZ stock to the call buyer at 22.50,
• We receive 22.50
• We buy the XYZ stock for 20.00 sell it for 22.50 we now have 2.50 miners the call debit of -1.00 we have $ 1.50 (150.00) profit.

XYZ stock drops below 20.00 our maxim loss is the -1.00 debit from buying the call and the call we wrote expires worthless as the call we bought.

XYZ stock trades at 21.50 by option expiration we can buy the XYZ stock at 20.00 and sell it or use it to do covered calls, or we can sell the April 20 strike price call that we bought and receive about a 1.00 (100.00), the call we wrote expires worthless and we break even on the trade.

The above dollars figures, do not take in to consideration brokers fees, margin cost, etc.