Bull spread

This strategy can be implemented using either call options or put options.

Using calls, the strategy is a long position in a call with strike price X1 combined with a short position in a call with strike price X2, where X1 is less than X2. Both options have the same expiration date. A bull spread created from calls requires an initial investment.

Using puts, the strategy is a long position in a put with strike price X1 combined with a short position in a put with strike price X2, where X1 is less than X2. A bull spread created with puts involves a positive cash flow to the up front and payoff that is either negative or zero.

Upside potential and downside risk are both limited.