Long Call Spread


Buy a Call Option, Sell a Higher Strike Call Option

Margin Requirement

No, pay the difference in premiums


  • Establishes a Range of Protection from higher prices
  • Cost is reduced by selling higher strike call
  • Lower futures price may improve your buying price
  • Flexible, offset at any time, receive remaining value


  • Premium paid in full at time of purchase
  • Protection limited to the higher call strike less the cost
  • Offsetting before expiration will change the cost & P/L (advantage in
    lower market, disadvantage in higher market)

When to Apply

  • If market outlook is bearish
  • If unlimited protection to higher prices is not necessary or if upside risk
    can be better defined or measured
  • If flexibility is needed to participate in all lower prices
  • If capital constraints require maximum pre-defined margin exposure
  • As an adjustment to a long future, long call or long collar position after
    an increase in price
  • If in a neutral implied volatility environment

Potential Adjustment

  • In a rising market, roll-up short call to a higher strike price to extend
    range of protection, roll up long call option to capture gain from increase
    in price, and/or sell put option to create credit or help offset cost
  • In a falling market, buy back short call option, roll down long call option
    to capture opportunity from decline in price and/or sell put option to
    create credit or help offset cost