Bull Call Spread Screener Results For February 2nd

With markets looking increasingly resilient, it’s a good time to run the Bull Call Spread Screener.

A bull call spread is an options strategy that a trader uses when they believe the price of an underlying stock will move higher in the short term.

To execute the strategy, a trader would buy a call option and sell a further out-of-the-money call option with the following conditions:

• Both call options must use the same underlying stock
• Both call options must have the same expiration
• Both call options must have the same number of options

Since the strike price of the sold call is higher than the strike price of the bought call, the initial position will be a net debit.

The bull call spread profits as the price of the underlying stock increases, similar to a regular long call.

The difference between a bull call spread and a regular long call is that the upside potential is capped by the short call.

The purpose of the short call is to mitigate some of the overall costs of the strategy at the expense of putting a ceiling on the profits.

Losses are also capped, in this case by the debit taken when you execute the trade.

Let’s take a look at Barchart’s Bull Call Spread Screener for February 2nd:

As you can see, the scanner shows some interesting Iron Condor trades on stocks such HUT, ZIM, INTC, MSFT, SNAP, CCL, AAPL, GOOGL and UPST.

Let’s adjust the scanner to make sure we are only looking for bull call spreads on stock with a Buy rating and Mark Cap above 40 billion.

This scan gives us the following results:

MPC Bull Call Spread Example

Let’s take a look at the first line item – a bull call spread on MPC. 

This bull call spread trade involves buying the April expiry 120 strike call and selling the 150 strike call.

Buying this spread costs around $8.75 or $875 per contract. That is also the maximum possible loss on the trade. The maximum potential gain can be calculated by taking the spread width, less the premium paid and multiplying by 100. That give us:

30 – 8.75 x 100 = $2,125.

If we take the maximum gain divided by the maximum loss, we see the trade has a return potential of 242.86%.

The probability of the trade being successful is 38.2%, although this is just an estimate and does not indicate the probability of achieving the maximum profit.

The spread will achieve the maximum profit if MPC closes above 150 on April 21. The maximum loss will occur if MPC closes below 120 on April 21, which would see the trader lose the $875 premium on the trade. 

The breakeven point for the Bull Call Spread is 128.75 which is calculated as 120 plus the $8.75 option premium per contract.

The Barchart Technical Opinion rating is an 88% Buy with a weakening short term outlook on maintaining the current direction.

MPC is showing an IV Percentile of 6% and an IV Rank of 11.67%. The current level of implied volatility is 32.66% compared to a 52-week high of 52.01% and a low of 30.11%.

BAC Bull Call Spread Example

Let’s look at another example, this time using Bank of America.

This bull call spread also uses the April expiry and involves buying the 35 strike call and selling the 42 strike call.

This trade would cost $219 and have a maximum potential profit of $481.

The Barchart Technical Opinion rating is a 82% Buy with a strengthening short term outlook on maintaining the current direction.

BAC is showing an IV Percentile of 0% and an IV Rank of 0.79%. The current level of implied volatility is 22.73% compared to a 52-week high of 47.67% and a low of 22.53%.

Mitigating Risk

Thankfully, bull call spreads are risk defined trades, so they have some build in risk management. The most the MPC example can lose is $875 while the BAC call spread has risk of $281.

For each trade consider setting a stop loss of 25-30% of the max loss.

Also keep an eye on key support levels and moving averages.

Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

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