Call Bull Spreads are more losely called Long Call Spreads and are made up of long call option and a short call in the same expiration month but where the short call has a higher strike price than the long.
The Max Loss is limited to premium paid for the long option minus the premium received for the short option.
The Max Gain is limited to the difference between the two strike prices minus the net premium paid for the spread.
When to use: When you are mildly bullish on market price and/or volatility.
You can see from the above graph that a call bull spread can only be worth as much as the difference between the two strike prices. So, when putting on a bull spread remember that the wider the strikes the more you can make. But the downside to this is that you will end up paying more for the spread. So, the deeper in the money calls you buy relative to the call options that you sell means a greater maximum loss if the market sells off.
Like I mentioned, a call bull spread is a very cost effective way to take a position when you are bullish on market direction. The cost of the bought call option will be partially offset by the premium received by the sold call option. This does, however, limit your potential gain if the market does rally but also reduces the cost of entering into this position.
This type of strategy is suited to investors who want to go long on market direction and also have an upside target in mind. The sold call acts as a profit target for the position. So, if the trader sees a short term move in an underlying but doesn't see the market going past $X, then a bull spread is ideal. With a bull spread he can easily go long without the added expenditure of an outright long stock and can even reduce the cost by selling the additional call option.