Bull spread

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Bull spread

A spread strategy used in options and futures trading that is designed to capitalize on expected price appreciation. A bull spread using call options is created by buying a call option on an asset with a certain strike price and selling a call option on the same asset with a higher strike price (same expiration date). A bull spread with put options is created by buying a put option with a low strike and selling a put option with a high strike price (same expiration date). Less frequently, the bull spread is implemented by buying the nearby futures contract and selling the next out contract.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Bull Spread

A high-risk option strategy in which one buys and sells option contracts in such a way that one benefits the most if the price of the underlying asset rises. For example, one can buy a call with a low strike price and sell another call with a high strike price. If the underlying asset rises, the investor stands to make a great deal of money very quickly. However, if the price does not rise, one can lose the investment.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

bull spread

In futures and options trading, a strategy in which one contract is bought and a different contract is sold in such a manner that the person undertaking the spread makes a profit if the price of the underlying asset rises. Two contracts are used in order to limit the size of the potential loss. Compare bear spread.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Bull spread.

A bull spread is an options strategy that you use when you anticipate an increase in the price of the underlying instrument, such as a stock or an index.

As in any spread, you purchase one option and write another on the same underlying item. Both options are identical except for one element, such as the strike price or the expiration date.

For example, with a vertical bull call spread, you buy a call with a lower strike price and sell a call with a higher strike price. With a vertical bull put, you buy a put at a lower price and sell a put at a higher price.

In either case, if you're right about the behavior of the underlying instrument, you could have a net profit. For example, you would make money if a stock whose price you expect to increase does gain value. If you're wrong, you could have a net loss cushioned by the income from the sale of one of the legs of the spread.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Karl Robinson's side continued to press and O'Shea could have made amends for the miss, but Bull spread himself well to keep the score deadlocked.
However, the profit potential in a bull spread is limited once the index crosses its break-even level.
If this basic strategy is appealing, but the potential downside risk is unacceptable, investors may prefer a bull spread (described below).
The bull spread is a moderately bullish strategy investors may employ when they are fairly certain that the market will not fall but want to cap the risk of loss.
Investors may implement the bull spread in two different ways:
The profit profiles for the call-based bull spread and the put-based bull spread are nearly identical, but the initial outlay for the two positions differs considerably.
For example, using the same parameters as for Figures 41.6 and 41.7, except that the strike prices are set at 55 and 65, instead of 45 and 55, the call-based bull spread and put-based bull spread profit profiles are as shown in Figures 41.8 and 41.9, respectively.
The bear spread is the moderately bearish analog to the vertical bull spread. Investors may employ this strategy when they think that the market will not rise, but they want to limit their risk of loss.