• Skip to primary navigation
  • Skip to content
  • Skip to primary sidebar
  • Skip to footer
StoneX®

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
Home / Education / Futures & Options Strategy Guide / Bull Spread

Bull Spread

Overview

Pattern evolution:
Bull Spread

Learn 21 futures and options trading strategies in this complimentary,  easy-to-read guide. Download Now >>

When to use: If you think the market will go up, but with limited upside. Good position if you want to be in the market but are less confident of bullish expectations. You’re in good company. This is the most popular bullish trade.

Profit characteristics: Profit limited, reaching maximum if market ends at or above strike price B at expiration. If call-vs.- call version (most common) used, break-even is at A + net cost
of spread. If put-vs.-put version used, break-even is at B – net premium collected.

Loss characteristics: What is gained by limiting profit potential is mainly a limit to loss if you guessed wrong on market. Maximum loss if market at expiration is at or below A. With call-vs.-call version, maximum loss is net cost of spread.

Decay characteristics: If market is midway between A and B, little if any time decay effect. If market is closer to B, time decay is generally a benefit. If market is closer to A, time decay is generally detrimental to profitability.

CATEGORY: Directional
Long call A, short call B
Long put A, short put B

Example

Bull Spread Example

Scenario:
The trader feels bullish on Lumber, but volatility is in question. He could try futures as an alternative, but wants the comfort of a limited loss position. He decides on a bull spread with the higher strike written at the top of his expected trading range of 210.

Specifics:
Underlying Futures Contract: November Lumber
Futures Price Level: 193.00
Days to Futures Expiration: 60
Days to Options Expiration: 40
Option Implied Volatility: 18.6%
Option Position:

Long 1 Nov 200 Call – 2.10 ($315)
Short 1 Nov 210 Call + 0.50 ($ 75)
– 1.60 ($240)

At Expiration:
Breakeven: 201.60 (200.00 strike + 1.60 debit)
Loss Risk: Limited to premium paid. Losses increase below 201.60 to a maximum loss below 200.00 of 1.60 ($240).
Potential Gain: Limited to difference between strikes less debit paid (10.00 – 1.60) 8.40 ($12,600). Gains mount above 201.60 with maximum profit at 210.00.

Things to Watch:
Volatility changes affect this spread very little. Therefore, if the trader has an opinion on volatility, one of the other strategies may work better. Check the next page for follow-up strategies.

New call-to-action

Additional Futures & Options Strategies

  • How to Use This Guide
  • Long Futures
  • Long Synthetic Futures
  • Short Synthetic Futures
  • Long Risk Reversal
  • Short Risk Reversal
  • Long Call
  • Short Call
  • Long Put
  • Short Put
  • Bear Spread
  • Long Butterfly
  • Short Butterfly
  • Long Iron Butterfly
  • Short Iron Butterfly
  • Long Straddle
  • Short Straddle
  • Long Strangle
  • Short Strangle
  • Ratio Call Spread
  • Ratio Put Spread
  • Ratio Call Backspread
  • Ratio Put Backspread
  • Box or Conversion

Contents Courtesy of CME Group.

Primary Sidebar

Tips & Strategies

How Does Inflation Affect Markets?

The highest inflation measure in more than 40 years has left many markets in utter disarray: Nasdaq is at its lowest since 2020, interest rates are their highest since 2007, and the US dollar is the strongest it’s been since the early aughts

The End of an Era for the Euro

If you started trading in the last two decades, you’ve only known a world in which the euro is worth more than the US dollar. You’d have to go all the way back to 2002 to find data points representing the EUR/USD conversion rate that start with a zero to the left of the decimal point.

Charts

Probabilities are Accurate Until They Aren’t

What do all the probabilities in your life have in common? They’re all dynamic – constantly changing. At the conclusion of the event a binary 0% or 100% is realized, but the journey to that ending can witness wild swings in either direction….

More Tips & Strategies

  • How the Fed Affects Interest Rates
  • Neutral Trading Strategies for an Inactive Market
  • Technical Analysis 101: What Is the Parabolic SAR?
  • OHLC Charts vs. Candlestick Charts: Which Is Better?
  • How to Harness the Power of Moving Average Crossovers
  • Technical Analysis of Stocks: Understand the Pros and Cons
Trustpilot

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top
 

Loading Comments...
 

You must be logged in to post a comment.