The Overeducated, Underpaid Guide to Vertical Call Spreads

So you’ve decided that maybe long‐term index funds and target‑date babysitters won’t carry you to freedom. In our last installment we argued that time diversification matters and that options aren’t speculation; they’re leverage with rules. But if the word “options” still conjures images of CNBC charlatans whispering about gamma squeezes, you’re not alone. As an overeducated, underpaid professional, you already spend more time in meetings than eating. Where’s the bandwidth to learn a new language of calls and puts?

Enter the vertical call spread, sometimes called the bull call spread. It is opened by buying one call at a lower strike price and selling another call at a higher strike price often but not always with the same expiration. You’re bullish enough to pay for upside, but prudent enough to sell some of that upside to fund the position. This creates a defined‑risk, defined‑reward trade: a perfect fit for those of us who hate surprises.

The way you choose your strikes, expirations and volatility matters. We will not cover every permutation. That’s for later. Instead, this article will lay out a repeatable framework for constructing a vertical call spread: deep‑in‑the‑money long call + at‑the‑money (or slightly out‑of‑the‑money) short call.

Anatomy of a Bull Call Spread

At its core, a bull call spread takes a bullish view on an underlying asset, but not the “to the moon” variety. You are betting on a moderate rise (like the S&P 500 tends to do on an annual basis). For our purposes, we do not much care that the long call gives you the right to buy the stock and the short call obligates you to sell. We intend to close the spread long before that eventuality ever begins to materialize.

Selecting the Long Call: Go Deep or Go Home

The long leg is your engine. Choose it poorly and your spread stalls before leaving the driveway. General rule of thumb: pick a contract that has a delta around 0.80 or higher.

Delta has two definitions. It technically measures how much the option’s price moves relative to the underlying; a delta of 0.80 means the option will gain about 80 cents for every $1 rise in the stock. It also serves as a shorthand for probability: roughly speaking, an option with an 80 delta has about an 80% chance of expiring in the money. Remember those definitions. They are important signals and will come up again.

Because deep-in-the-money options have more intrinsic value, they are less fragile in drawdown situations. That is a very important and often overlooked feature of in-the-money options. Many people buy at-the-money options which tend to get hammered in draw-down situations. A higher delta therefore gives you almost stock‑like participation with far less capital at risk.

Finally, this long call should also be dated at least a year out. Longer maturities (LEAPS) are less sensitive to time decay (theta) and allow the stock time to recover from drawdowns. However, LEAPS have high exposure to implied volatility, so it’s important to look to buy them during periods of relatively low volatility (e.g., whenever the VIX is in the low-to-mid-teens). In practice, be sure to check several expirations (1 year vs. 2 years) and choose the one with lower implied volatility.

Picking the Short Call: Sell at or Slightly Above the Money

The short call is the financing and income-generation leg. The general rule of thumb is to sell a call at or just above the current price to maximize the premium you collect, reduce your cost, offset theta decay, and lower the breakeven.

You may wonder: Why not sell far out‑of‑the‑money calls? Because far OTM calls pay little premium, leaving you with a higher net debit and a lower probability of profit. On the other hand, selling at‑the‑money or slightly OTM calls means they’ll get “hammered” if the stock falls. This is an important feature, not a bug. A larger premium cushions your long call’s time decay and recoups some cost even when the stock grinds sideways.

For the short call, shorter maturities are your friend: selling 30- to 90-day calls maximizes theta capture and gives you frequent opportunities to adjust, roll, or re-sell as conditions change. Ideally, you want to sell this leg when implied volatility is elevated relative to the long call: harvesting premium to lower your breakeven and continuously finance the position. Be sure to check several expirations (30 days vs. 60 days) and choose the one with higher implied volatility.

In practice, think of the short call as rent you collect on your long exposure: it won’t make you rich on its own, but over time it meaningfully reduces cost, volatility, and regret.

Checklist & Next Steps

In next installments, we’ll look at how to structure other types of trades, manage risk and integrate options into a long‑term portfolio. The corporate grind doesn’t go away overnight, but structured leverage and disciplined risk management can help you build your escape hatch one spread at a time.

Here’s a checklist to build your first vertical call spread:

1.     Identify a quality stock or ETF, like SPY, QQQ, or something sector-focused like XLF, XLK

2.     Choose your long call:

o At least 12 months to expiration to reduce theta and give time for recovery

o Deep in‑the‑money with a delta around 0.80 to 0.90

o Compare implied volatilities across expirations; pick the option with the lower IV

3.     Select your short call:

o Between 30 to 90 days is ideal to maximize theta capture, but can be as long as the same expiration as the long call

o At‑the‑money or slightly out‑of‑the‑money to collect a meaningful premium

o Compare implied volatilities across expirations; pick the option with the higher IV

4.     Define your exit. Decide your target profit (often 50–70% of the maximum profit) and stop‑loss (e.g., if the spread loses half its value, cut your losses).