Previously in this column, we discussed how to moderate delivery risk on a bull call spread. To recap, we compared two strategies: closing the position before expiry against an alternative strategy of shorting a strike that is below the resistance level instead of above that level so that the probability of both strikes expiring in-the-money (ITM) is high. We showed that closing the position before expiry is preferable. This week, we discuss setting up bull call spread on the Nifty Index with next-week options. The objective is to explore if the strategy will generate greater profits compared to setting up the spread with near-week options.

Net debit

A bull call spread involves going long on a lower strike call, preferably at-the-money (ATM), and short on a higher strike out-of-the-money (OTM) call. The maximum gain from the spread is the difference between the strikes minus the net debit. So, setting up a spread with next-week calls ought to have lower gains compared to the near-week calls of the same strike; for the spread using next-week calls will have a higher net debit because of higher time value.

But setting up the spread with next-week options can be useful when the overhead resistance is far away from the underlying’s current price. For then, it is highly unlikely that the stock will trade near the resistance level before expiry of the near-week option. If you were to set up the spread with near-week options, the gains will be significantly lower compared to the maximum gain on the position. This is because the lower strike call will carry lower intrinsic value than if the underlying price were to trade near the resistance level. Setting up the spread with the next-week option gives the underlying enough time to move towards the resistance level.

Consider two scenarios. Scenario 1: The underlying moves closer to the resistance level at or near the expiry of the near-week option. The gains will be lower if next-week strikes are used because the next-week short strike will have to be closed at a higher price as it will carry higher value than the near-week short strike. Scenario 2: The underlying moves closer to the resistance level near the expiry of the next-week option. This is beneficial for the position. This discussion suggests that it is optimal to set up the spread with next week strikes only when the resistance level is far away from the current spot price.

Optional reading

The next-week calls may carry lower implied volatility but will have higher time value, leading to higher net debit. This does not mean losses will be greater. If you are forced to close either spread position just before its respective expiry because the underlying has not moved enough, your losses are unlikely to be significantly different between near-week and next-week options. If, however, you close your next-week options before near-week expiry, losses will be lower.

(The author offers training programmes for individuals to manage their personal investments)

Published on February 28, 2026