Limited profit potential and limited risk. Risk limited to initial investment
Profit if struck moves up. Max profit above higher strike. Max loss below lower strike
Lower investment than just buying a call.
Better than buying call if stock will move up slowly and only moderately because spread needs passage of time to be profitable. If stock will move up quickly, better to buy a call.
Better profit if the stock doesn’t rise too far beyond higher strike
Break even = lower strike + debit amount
Aggressiveness
Least aggressive: Both calls are in the money. Low profit but high probability. Example, stock at 50, sell 48 call for 3, buy 45 call for 5. Max profit above 48 = 1. Profit even if stock falls by 2 points
Regular aggressive: buy call near strike, sell OTM
Extremely aggressive: both calls OTM
Other Uses
Bought a call that’s now in loss, roll down to a bull spread. Sell the original call and one more, use the money to buy a lower call. Will require a smaller rebound in stock to break even.
If the call is in profit, one could sell a call creating a bull spread to lock in some profit
Bought a stock that’s now in loss, create a bull spread and also sell an extra call covered by stock. This will lower break even point
Can be used instead of a covered write. If there’s a deep in the money call available with no time premium, use this call instead of stock for a covered write. Smaller investment, same profit potential.