Bull Call Spread Screener Results For August 19th

With stocks in bullish mode it’s a good time to run Barchart’s 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 August 19th:

As you can see, the scanner shows some interesting Bull Call Spread trades on stocks such as NVDA, CVX, XOM, NFLX and PFE.

Nvidia Bull Call Spread Example

Let’s take a look at the first line item – a bull call spread on Nvidia (NVDA). 

This bull call spread trade involves buying the November 20th expiry $200 strike call and selling the $205 strike call.

Buying this spread costs around $1.30 or $130 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:

5 – 1.30 x 100 = $370.

If we take the maximum gain divided by the maximum loss, we see the trade has a return potential of 35.14%.

The probability of profit is 64.7%, 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 NVDA closes above $205 on November 20th. The maximum loss will occur if NVDA closes below $200 on November 20th, which would see the trader lose the $370 premium on the trade. 

The breakeven point for the Bull Call Spread is $203.70 which is calculated as $205 plus the $1.70 option premium per contract.

The Barchart Technical Opinion rating is a 100% Buy with a Strengthening short term outlook on maintaining the current direction.

Long term indicators fully support a continuation of the trend.

Nvidia is showing an IV Percentile of 45% and an IV Rank of 30.51%. The current level of implied volatility is 39.13% compared to a 52-week high of 54.93% and a low of 32.20%.

Chevron Bull Call Spread Example

Let’s look at another example, this time using Chevron (CVX).

This bull call spread uses the December expiry and involves buying the $190 strike call and selling the $200 strike call.

This trade would cost $325 and have a maximum potential profit of $675.

The Barchart Technical Opinion rating is a 72% Buy with a Strongest short term outlook on maintaining the current direction.

Long term indicators fully support a continuation of the trend.

Chevron is showing an IV Percentile of 44% and an IV Rank of 48.46%. The current level of implied volatility is 25.09% compared to a 52-week high of 32.62% and a low of 18.01%.

Mitigating Risk

Thankfully, bull call spreads are risk defined trades, so they have some build in risk management. 

The most the NVDA example can lose is $130 while the CVX call spread has risk of $325.

For each trade consider setting a stop loss of 50% 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.