What characterizes a "bullish spread" in options trading?

A bullish spread in options trading is characterized by the strategy of purchasing one option and selling another with a higher strike price. This approach typically involves buying a call option while simultaneously selling another call option that has a higher strike price. The primary goal of this strategy is to benefit from an expected increase in the price of the underlying asset.

By executing this strategy, the trader limits both the potential gains and losses. The purchase of the call option allows for profit if the underlying asset rises above the lower strike price, while the sale of the higher strike price call option helps offset the cost of the purchased option. This type of spread creates a defined risk profile.

The structure of this strategy effectively capitalizes on upward market movements while managing risk components, as the maximum loss is limited to the net premium paid for the spread, and the maximum gain occurs if the price of the underlying asset is at or above the higher strike price at expiration.