The call spread is an option combination that constitutes a modified version of a call option. By definition, it is an option spread which involves buying a call with a given strike price and expiration date while short selling another call with a different strike and expiration date, on the same underlying. The payoff is similar to that of a call option except that it only rises to a specific level and doesn’t exceed it. The following figure (the graph on the left) shows the payoff pattern of a call spread:

The payoff is zero as long as the underlying price is at strike X₁ or below. Beyond that level, the payoff starts to increase until the underlying reaches the level of strike X₂, at which point it no longer gains in value. In this sense, a call spread can be created by combining vanilla options. The second graph illustrates the payoff diagram of a short call spread; it is just the mirror image of the long call spread with respect to the horizontal axis. The third graph demonstrates how a call spread results from a combination of a long call (strike X₁) with a short call (strike X₂).

A call spread has many variations including: a bear spread, a bull spread, and a calendar spread.