Bull Call Spread Strategy Explained for Australians (2025 Guide)

As market volatility continues to be a defining feature of the Australian share market in 2025, investors are seeking smarter ways to manage risk while still capturing upside potential. One options trading strategy gaining traction is the bull call spread—a powerful yet accessible approach for those with a moderately bullish outlook. Whether you’re a seasoned trader or a savvy DIY investor, understanding this strategy could be a game-changer for your portfolio.

What is a Bull Call Spread?

A bull call spread is an options trading strategy designed to profit from a modest rise in the price of an underlying share or index. It involves buying a call option at a lower strike price and simultaneously selling another call option at a higher strike price, both with the same expiration date. The result? You reduce your upfront cost (compared to buying a call outright) and define both your maximum risk and potential reward.

• Buy 1 call option (lower strike, e.g., S&P/ASX 200 at 7,500)

• Sell 1 call option (higher strike, e.g., S&P/ASX 200 at 7,700)

• Both contracts expire on the same date

The premium received from selling the higher strike call offsets part of the cost of the lower strike call, creating a net debit position. Your maximum profit is capped, but so is your loss—making this an attractive choice for risk-conscious investors.

Why the Bull Call Spread is Trending in 2025

Several factors are fuelling interest in the bull call spread among Australian investors in 2025:

• Market Volatility: With continued uncertainty around RBA rate moves and global economic headwinds, investors are reluctant to risk large sums on outright positions.

• Options Accessibility: ASX-listed options have seen improved liquidity and tighter spreads, making multi-leg strategies more cost-effective.

• Taxation Clarity: Recent ATO guidance has reaffirmed that gains and losses from listed options are treated as capital gains/losses for most retail investors, providing tax planning certainty.

• Brokerage Innovation: Australian brokers like SelfWealth and IG have rolled out user-friendly multi-leg trading platforms, reducing the complexity and execution cost for retail traders.

For example, a Sydney-based investor expecting a moderate rebound in Commonwealth Bank (CBA) shares post-earnings might enter a bull call spread to gain leveraged exposure, while limiting downside if the recovery stalls.

How to Construct and Manage a Bull Call Spread

Let’s break down the process and key considerations for building a bull call spread on an Australian share or index:

• Choose Your Underlying: Select a share or ETF you expect will rise moderately in price (e.g., CBA, BHP, or the ASX 200 index).

• Pick Your Strikes: Buy a call at-the-money or just out-of-the-money. Sell a call at a higher strike where you believe upside may be capped.

• Set Expiry: Most investors opt for one to three months out, balancing time premium with event-driven catalysts (like earnings or RBA meetings).

• Calculate Cost and Potential Return: The net debit is the difference between premiums paid and received. Maximum profit is capped at the difference between strikes minus this net debit. Maximum loss is limited to your net debit.

• Monitor and Adjust: Track the trade as expiry approaches. If the share surges past the sold strike, you’ve captured your maximum profit. If the price stays below the bought strike, your loss is limited to the initial outlay.

Here’s a worked example for 2025:

• CBA trading at $112

• Buy May $110 call for $4.20

• Sell May $115 call for $1.80

• Net cost: $2.40 per share (or $240 per contract)

• Maximum profit: ($115 - $110) - $2.40 = $2.60 per share ($260 per contract)

• Maximum loss: $2.40 per share ($240 per contract)

Risks, Tax, and Practical Tips for 2025

While the bull call spread offers a defined risk profile, it’s not without considerations:

• Limited Upside: You cap your potential profit, which can be frustrating if the share surges unexpectedly.

• Assignment Risk: Early exercise of the sold call is possible if the underlying pays a dividend, so monitor ex-dividend dates.

• Liquidity: Stick to highly traded options to ensure tight bid-ask spreads and efficient execution.

• Tax Timing: The ATO treats gains and losses as capital events, so keep records for end-of-year reporting.

• Trading Costs: Factor in brokerage and exchange fees, which can eat into profits if your position is small or you trade frequently.

With the ASX expanding its educational resources and more brokers offering demo accounts, there’s never been a better time to practice and refine options strategies before committing real capital.

Conclusion: Is the Bull Call Spread Right for You?

The bull call spread is a smart, disciplined strategy for Australian investors seeking to participate in moderate share price gains while capping downside. It’s especially relevant in 2025’s climate of uncertainty and rapid market swings. If you’re looking to level up your investing toolkit, consider how the bull call spread could add controlled risk and targeted opportunity to your portfolio.