Bull spreads are becoming a go-to strategy for Australian investors looking to capture gains from upward-trending markets—without the stomach-churning risks of outright bets. As the ASX continues to ride waves of volatility in 2025, understanding bull spreads could be the edge you need to keep your portfolio both nimble and protected.

What Is a Bull Spread? The Basics Explained

At its core, a bull spread is an options strategy designed to profit from a moderate rise in an underlying asset, such as an ASX-listed stock or index. Rather than speculating on wild price swings, a bull spread lets you define both your maximum risk and reward—making it ideal for cautious optimists in today’s unpredictable environment.

Bull spreads come in two main varieties:

• Bull Call Spread: Buy a call option at a lower strike price and sell a call at a higher strike price, both with the same expiry. You pay a net premium, but your potential profit and loss are capped.
• Bull Put Spread: Sell a put option at a higher strike price and buy a put at a lower strike price. You receive a net premium, with similar risk/reward caps.

Example: Suppose you’re bullish on Commonwealth Bank (CBA), trading at $110 in March 2025. You might buy a CBA June $110 call and sell a $120 call. Your maximum gain is the difference between strikes minus the net premium paid, while your maximum loss is limited to the premium.

Why Bull Spreads Are Booming in 2025

Australian markets in 2025 are being shaped by several forces: a cooling inflation rate, RBA’s cautious easing of rates, and renewed interest in equities following a flat 2024. Many investors want upside exposure but are wary of overpaying for options or risking large capital losses. Bull spreads offer a solution:

• Defined Risk: Both maximum loss and gain are known upfront, which is crucial in volatile times.
• Lower Cost: The premium received from the sold leg offsets the cost of the bought leg, making it cheaper than buying a call outright.
• Efficient Use of Capital: Ideal for SMSFs and self-directed investors seeking cost-effective strategies.

According to recent ASX derivatives data, the volume of spread strategies has increased by 18% year-on-year, with bull call spreads leading the pack. This trend is fueled by retail investors and professional managers alike, who are seeking to ‘play the upside’ without reckless exposure.

When (and When Not) to Use a Bull Spread

Bull spreads aren’t for every scenario. Here’s how to decide if they’re right for your outlook:

• Best Used When: You expect a moderate rise in an asset—enough to profit, but not a moonshot.
• Less Effective When: You expect extreme volatility or want unlimited upside. The profit cap means you won’t fully participate if the stock surges far beyond your upper strike.
• Tax and Policy Considerations: As of 2025, ATO rules treat option profits as capital gains, and recent regulatory guidance requires clearer disclosure of risks for retail investors using derivatives. Always track your transactions for accurate tax reporting.

Case in point: An investor anticipating a 5–10% rally in BHP following China’s 2025 stimulus would be better off with a bull spread than an outright call, thanks to the lower upfront cost and defined risk profile.

How to Implement a Bull Spread on the ASX

Ready to try a bull spread? Here’s a step-by-step guide:

1. Choose Your Asset: Select a stock or ETF with listed options and sufficient liquidity.
2. Decide Your Strikes: Identify your expected price range. Pick a lower strike (to buy) and a higher strike (to sell).
3. Enter the Trade: Use your broker’s options platform to simultaneously execute both legs of the spread.
4. Monitor & Adjust: Track market moves and be prepared to close the position early if your outlook changes.

Many Australian brokers now offer integrated options tools, and several platforms have rolled out enhanced spread trading interfaces in 2025, making these strategies more accessible than ever.