Course Description
Why pay full price for a Long Call when you can get a discount? The Bull Call Spread is a professional-grade strategy that uses a "short leg" to subsidize the cost of your "long leg." We will use our US 500 example to show how adding a $7,100 strike can transform your trade's risk-to-reward profile.
Traditional Options vs. Spread Betting
IG’s "options" are actually Spread Bets based on option prices, offering a unique edge for traders in the UK and Ireland.
Tax Status: Spread betting is unique to the UK and Ireland. Profits are exempt from Capital Gains Tax (CGT) and Stamp Duty.
Trade Unit: Instead of "contracts" (100 shares), you trade in $ per point (or £ per point).
The Credit Advantage: Unlike the Bear Put Spread where you pay a debit, here you receive a credit upfront. You are the "house" collecting the premium.
Currency: You can trade US markets in GBP or USD to avoid FX conversion fees.
Note: While you can fund in Euro, spread bets on options are executed in GBP or USD only.
Module 1: What is a Bull Call Spread?
A Bull Call Spread is a vertical spread where you buy one call and sell another further "Out-of-the-Money" (higher strike).
The Goal: Profit from the US 500 rising, but with a lower "breakeven" than a standard call.
The Trade-Off: In exchange for a lower cost, you agree to cap your maximum profit at the higher strike price.
Why it's smarter: It reduces your "Net Debit" (the money you put at risk) and helps offset the daily cost of time decay.
Module 2: The US 500 Case Study (The Spread)
We are using the same $6,800 long call from the previous Long Call course, but we are now adding a second "leg" to turn it into a spread.
The Setup:
Current Market: US 500 @ $6,950
Leg 1 (Long): Buy $6,800 Call @ 220.35 pts
Leg 2 (Short): Sell $7,100 Call @ 35.70 pts (This is your "Subsidy")
The Math at $5 per point:
Net Debit (Cost): 220.35 - 35.70 = 184.65 pts
Total Max Risk: 184.65 times$5 = $923.25 vs. $1,101.75 for the long call alone.
Maximum Value: 7,100 (Short Strike) - 6,800 (Long Strike) = 300 pts
Maximum Profit: (300 - 184.65) times $5 = $576.75
Breakeven: $6,800 (Long Strike) + 184.65 (Net Debit) = $6,984.65
Module 3: Probability
By selling the $7,100 call, you have improved your position in two ways:
Lower Breakeven: Your breakeven has dropped from $7,020.35 down to $6,984.65. The market doesn't have to move as far for you to start making money.
Module 4: "What If?" Expiry Scenarios
Let’s see how the spread performs compared to the naked call at the end of the 35 days.
Scenario A: US 500 stays Flat (closes at $6,950)
Long 6800 Call: Worth 150 pts.
Short 7100 Call: Worth 0 pts (expires worthless).
Net Value: 150 pts.
Total Result: Loss of $173.25 (150 - 184.65) times $5.
Comparison: You lost $178.50 LESS than the Long Call because the short leg protected you.
Scenario B: US 500 drops to $6,800
Both calls expire worthless.
Total Result: Max Loss of $923.25.
Comparison: You saved $178.50 in total losses by using the spread versus the Long Call on its own.
Scenario C: US 500 rises to $7,100+ (The Target)
Long 6800 Call: Worth 300 pts.
Short 7100 Call: Worth 0 pts.
Net Value: 300 pts.
Total Result: Profit of $576.75.
Comparison with Long Call: While your profit is capped here, you reached your "Max Profit" much faster and with less capital at risk.
Module 5: The "Delta Compass" Workaround
As always, IG Index won't show you the Greeks. For this spread:
Check External Delta: Ensure your Long Leg ($6,800) has a Delta of 0.75+ and your Short Leg ($7,100) has a Delta of around 0.30.
The Goal: You want a "Net Delta" that is positive, meaning you still profit as the market rises, but at a controlled pace.
Strategy Comparison: Risk vs. Probability
Choosing the right strategy depends on your market view and your risk tolerance. At ShareNavigator, we emphasize Probability of Profit (PoP) over "lottery ticket" home runs.
Strategy | Market View | Max Profit | Max Risk | Probability of Profit | Best For... |
Aggressively Bullish | Unlimited | Premium Paid | ~30% - 40% | Fast-moving rallies. | |
Aggressively Bearish | Significant | Premium Paid | ~30% - 40% | Hedging a crash. | |
Neutral to Bullish | Net Credit | High | 75% - 85% | Consistent income. | |
Neutral to Bullish | Net Credit | Capped | 70% - 85% | Consistent income. | |
Neutral to Bearish | Net Credit | Capped | 70% - 85% | Selling "resistance." | |
Bull Call Spread | Moderately Bullish | Capped | Net Debit | ~50% - 60% | Cheap bullish entry. |
Moderately Bearish | Capped | Net Debit | ~50% - 60% | Cheap bearish entry. |
Why Credit Spreads Have a Higher Win Rate
A common question students ask is: "Why not just short the stock or buy a long put if I'm bearish?"
The answer lies in the three directions of the market:
Shorting a Stock / Long Put: You only win if the market moves DOWN. If the market stays flat or goes up, you lose. (1 out of 3 scenarios).
Bear Call Spread: You win if the market moves DOWN, stays FLAT, or even RISES SLIGHTLY (as long as it stays below your ceiling). (3 out of 3 scenarios).
By "selling" time and volatility instead of just betting on direction, you turn the math of the market in your favor.
💡 The ShareNavigator Golden Rule
"We don't try to predict the next 500-point move. We try to identify the 300-point range where the market won't go. Trading is not about being 'right'; it's about not being 'wrong' enough to lose money."
🧪 Practice Before You Trade (Risk-Free)
We strongly recommend that all our students start by practicing these strategies in a simulated environment. This allows you to master the IG deal ticket, understand price fluctuations, and test your "Option Income Engine" without risking a single penny.
Switch to a live account only once you are comfortable with the platform and your strategy execution.
🚀 Free Strategy Call
Trading theory is only 10% of the journey. The remaining 90% is mastering strategy application, market psychology, and capital preservation under live conditions.
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