Call Debit Spread: How to Profit From a Rally by Paying Less

What Is a Call Debit Spread?

A call debit spread (also called a bull call spread) is made up of two calls on the same stock with the same expiration:

• We buy one call, the one that gives us the profit if the stock goes up.
• We sell another call at a higher strike, which pays us a premium and makes the trade cheaper.

We pay the difference between the two premiums (hence "debit"). That amount is the maximum loss. In exchange for the cheaper entry, we accept a cap: we don't make any more money beyond the strike of the short call.

An Example With Round Numbers

With a stock at $100, buying just the 100 call costs $8 per share: $800 per contract. If we also sell the 110 call for $4, the trade costs $4: $400, half as much.

	100 call only	100/110 call debit spread
Cost and maximum loss	$800	$400
Maximum profit	Unlimited	$600 ($10 width − $4 paid)
Break-even at expiration	$108	$104
Time decay	Works against you	Works less against you: the short call also loses value

If the stock ends at $110 or higher, the spread is worth $10 and we make $600. Even if it rises to $150, we don't make more: the short call offsets what the long call gains above $110. You can check the break-even and the value of each leg with our options calculator.

How We Use It at MTO

It's probably the bullish strategy we use the most. Our approach has three traits:

1. Good companies and plenty of time

We open them on companies we have a good outlook for, with long expirations, often one or two years out. That gives the stock time to do what we expect, and the passing of days weighs very little.

2. Strikes that balance risk and reward

There's no magic formula: we test combinations until the potential profit clearly justifies what we pay, and we check that the strikes make sense against the chart's support, resistance and projections. The closer the strikes are to the stock price, the more we pay, but the sooner we start making money if the stock rises.

3. Closing as soon as there's a good profit

We don't wait for expiration. If the stock rises and the spread gains value, we close it and move on. Many of these trades last days or a few weeks, even when expiration is more than a year away.

A Real Case: MSFT 550/600

On April 9, 2026, in the $10,000 account, we opened a call debit spread on Microsoft expiring in March 2027:

• We bought the 550 call for $5.91 and sold the 600 call for $3.31: we paid $2.60 per share ($260), which was also the maximum loss.
• On July 30 we closed both legs: we sold the 550 call for $18.14 and bought back the 600 call for $10.63. The spread was worth $7.51.
• Result: +$488.17 net of commissions, almost double what we invested, without waiting for expiration.

Not all of them turn out this way: if the stock doesn't rise, the spread loses value and we can lose what we paid. That's why the next point matters.

What We Do if the Trade Goes Against Us

If the stock falls, the call we sold gets much cheaper. When buying it back costs very little (just a few dollars per contract), we close it:

• We remove the part that capped the upside and keep only the long call.
• If the stock keeps falling, the loss is almost the same as what we already had: we only add the little we paid to close the short call.
• If the stock recovers, we gain with no ceiling thanks to the long call… or we can sell another call higher up to recover part of the cost and have a spread again.

In other words: we risk very little extra in exchange for a lot of potential. For example, with the 100/110 spread from before, if the stock drops to $90 and the 110 call is worth $0.15, closing it costs $15: the maximum loss goes from $400 to $415, but if the stock returns to $115, the 100 call alone is worth $15 and we're no longer capped at $10.

And if We Think It's Going Down

The same idea in reverse is the put debit spread: we buy a put and sell another at a lower strike. We use it when we expect a drop to a specific zone.

If you want to review vertical spreads from scratch, Mario explains them in his tutorial on vertical spreads (in Spanish).