Strategy lab
Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.
2.6OptionsPayoffBullish
Bull call spread
Buy an at-the-money call and sell a higher-strike call. A cheaper bullish bet with gains capped at the upper strike.
Write positions with S (the underlying), call(strike, months) and put(strike, months). Strikes are fractions of today’s price; negative signs mean short.
Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.
- Source
- 151 Trading Strategies
- Section
- 2.6 · Options
- Asset class
- Options
- In the lab
- Payoff and monthly roll
Bull call spread (2.6)
Buy an at-the-money call and sell a higher-strike call. A cheaper bullish bet with gains capped at the upper strike.
Key equation
Lab formula
call(1.00) - call(1.05)How the option model works
Each leg is priced with Black–Scholes. For SPY the at-the-money volatility is 0.88 × the VIX, and a typical one-month S&P 500 skew makes out-of-the-money puts dearer and calls cheaper (0.9 volatility points per 1% of moneyness, flatter for longer expiries). Other underlyings use trailing realised volatility × 1.1 with no skew. The payoff chart shows profit at the first expiry and today. The roll backtest opens the structure at the close, marks it daily and reopens it at expiry. Bid–ask spreads are ignored, and they matter in practice.
More in Options
- 2.2 Covered call
- 2.3 Covered put
- 2.4 Protective put
- 2.5 Protective call
- 2.7 Bull put spread
- 2.8 Bear call spread
Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.