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).
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.
The Sublet Strategy: Getting the Market to Pay Your Rent
In our previous course on the Long Call, we compared buying an option to buying a house. We learned that every option has Intrinsic Value (your equity) and Extrinsic Value (the "rent" you pay for time).
In that example, you paid $70.35 in "Rent" for a 35-day trade. While that trade has explosive profit potential, paying that much "rent" every month can get expensive. The Bull Call Spread is the professional’s way of lowering that cost.
How it Works: The "Sublet" Analogy
Imagine you’ve rented that $6,800 "House" (the Long Call). You realize you don't actually need all the upstairs space—specifically, you don't think the market is going to go past $7,100 in the next month.
The Strategy: You "sublet" the $7,100+ portion of your house to another trader.
The Income: That trader pays you $35.70 upfront.
The Result: Your net rent just dropped from $70.35 down to $34.65.
The Math of the Discount
By subletting that upper floor, you’ve fundamentally changed your financial position:
Lower Cost: Your total "upfront" payment is cheaper.
Lower Breakeven: Because you paid less to get in, the market doesn't have to move as high for you to start profiting.
The Trade-Off: If the market "goes to the moon" (above $7,100), you don't get that extra profit because you sold those rights to your sub-tenant.
💡 ShareNavigator Pro Tip: Professionals use the Bull Call Spread when they want a high-probability bullish trade but don't want to pay "full retail price" for the time decay. It’s about being a "Smart Bull"—taking the profit you expect while letting someone else pay half your rent.
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
In a Bull Call Spread, you aren't just betting on a "hit or miss." Because you own the $6,800 Call and sold the $7,100 Call, you have created a Profit Zone between those two numbers. Let's look at how your $923.25 investment (184.65 pts) behaves at expiry.
Scenario A: Market Drops (US 500 at $6,800 or below)
Status: Both options expire worthless.
Result: Max Loss of $923.25.
The Benefit: Remember, if you had bought the naked Long Call, you would have lost $1,101.75. The spread saved you $178.50 in losses.
Scenario B: Market Stays Flat (US 500 at $6,950)
Status: Your $6,800 Call is worth 150 points. Your sold $7,100 Call is worthless.
Math: 150 (Value) - 184.65 (Cost) = -34.65 points.
Result: Loss of $173.25.
The Benefit: You lost much less than the naked Long Call because your "sub-tenant" paid half your rent!
Scenario C: The "Grey Zone" (US 500 at $7,000)
This is the most important scenario to understand. The market has moved up, but hasn't hit your "ceiling" yet.
Status: Your $6,800 Call is worth 200 points. Your sold $7,100 Call is still worthless.
Math: 200 (Value) - 184.65 (Cost) = 15.35 points profit.
Result: Profit of $76.75.
The Lesson: You are now "In the Money." Every point the market rises from here adds $5 to your profit until you hit the $7,100 cap.
Scenario D: The Bullseye (US 500 at $7,100 or above)
Status: Your $6,800 Call is worth 300+ points. But you owe everything above 7,100 to the person you "sublet" to. The spread is worth exactly 300 points.
Math: 300 (Max Value) - 184.65 (Cost) = 115.35 points profit.
Result: Max Profit of $576.75.
The Lesson: You have achieved a 62% return on your capital. Even if the market goes to $8,000, your profit stays at $576.75.
Module 5: Platform Execution (The 2-Step Process)
Unlike professional options platforms that allow you to place a spread as a single order, IG Index requires you to place two separate trades. Because you cannot execute them at the exact same time, you must follow a specific sequence to ensure the platform accepts your orders without error.
The "Insurance First" Rule
Even though IG treats these as two separate bets and charges margin on both, we always recommend buying your long leg before selling your short leg.
Step 1: Buy the $6,800 Call FIRST (The "Floor")
Action: Go to the US 500 options chain, find the $6,800 strike, and click BUY.
The Logic: Buying an option is a "Limited Risk" trade. IG will accept this order easily as long as you have the premium (Net Debit) available. Once this is done, you officially have your "Bullish House" in place.
Step 2: Sell the $7,100 Call SECOND (The "Subsidy")
Action: Find the $7,100 strike and click SELL.
The Logic: Now that you already own the $6,800 call, you are "subletting" the higher strike. By doing this second, you avoid the platform potentially flagging you for a "Naked Call" (unlimited risk) trade, which can happen if you try to sell the 7,100 strike first.
The "Separate Trade" Reality
On your IG dashboard, you will not see one "Bull Call Spread" position. Instead, you will see:
A Long Position at $6,800 (Blue).
A Short Position at $7,100 (Red).
⚠️ ShareNavigator Warning: Because these are separate trades, you must be careful with your stake size. Ensure your $ per point (e.g., $5) is identical on both tickets. If you buy $10 per point and sell $5 per point, you aren't in a spread—you are in a very risky, mismatched position!
Module 6: 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 0.70+ 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.
🚀 Bull Call Spread: Pre-Flight Checklist
Before you click the buttons on your IG platform, run through these 5 professional checks. Accuracy in execution is just as important as the strategy itself.
Is it a DEBIT? Check: Unlike our income strategies (Short Puts or Bull Put Spreads), this trade should cost you money upfront. Ensure the deal ticket shows you are paying a Net Debit.
The "Buy-First" Order: Check: Did you buy the $6,800 strike before selling the $7,100 strike? Even though IG requires margin for both, always build the "floor" before you sell the "ceiling" to ensure the platform accepts the orders smoothly.
The 50% Rule: Check: Just like the Long Call, do you have a plan to close the spread if it loses 50% of its value? A "discounted" trade is still capital; don't let it turn into a 100% loss through inaction.
The Profit Cap Awareness: Check: Are you comfortable with the "Ceiling"? Remember that if the US 500 goes to $8,000, your profit stops growing at $7,100. You have traded away "explosive profit" in exchange for a "lower entry cost."
The Blue/Red Combo: Check: Look at your open positions dashboard. You should have exactly one BLUE (Buy) ticket and one RED (Sell) ticket. If both are the same color, you aren't in a spread—you are doubled up on risk!
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. |
🧪 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.
'Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.'
Switch to a live account only once you are comfortable with the platform and your strategy execution.
🚀 Free Strategy Call
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