We often get emails asking us to compare Covered Calls to Bull Call spreads. Some folks are looking for a way to implement something similar to a covered call trade, but without having to invest a ton of money to buy some of these high priced stocks.
Call spreads can be an answer. There are similarities in the two as well as some important differences. First, they are both bullish positions, which sell a "covered" call, either for added income, or to be able to get into the trade with less money. When selling a covered call one buys the stock (frequently using margin) and sells a call option for additional gains.
When entering a bull call spread, you buy a call at a given strike price, and sell a call at a higher strike price. The call that you sell is "covered" with the call that you bought. Some of the best stocks are rather high priced stocks and many investors just don't want to dish out that much money for the stock, so they seek an alternate method of accomplishing the same thing. Sometimes a Bull Call Spread is the answer.
