You initiate a short call position based on your view that the underlying will trade rangebound. Soon after, the underlying starts to move up, and you revise your view from neutral to bullish. What should you do with your short call position? This week, we discuss the mechanics of converting a short call position into a bull call spread. Repair StrategySuppose your initial view on the Nifty Index is neutral. You have a choice of shorting either a call or a put option. Your decision must be based on whether the immediate out-of-the-money (OTM) call or put has a higher implied volatility. The intention is to capture gains from time decay. Gains from time decay will be higher if time value of the option, captured by its implied volatility, is higher when you initiate a short position. Typically, implied volatility of puts is higher than that of calls, for strikes equidistant from the underlying. That is, if the Nifty Index is trading at 24050, the 24000 put will have a higher implied volatility than the 24100 call. Suffice it to understand fear is more powerful than greed. So, downside movement can be sharper than the upside movement in an underlying. That means risk associated with short puts is greater than with short calls. Therefore, you short an immediate OTM call. Two days later, the Nifty Index starts moving up. You now have two choices – close your short position or repair the strategy. Closing the short position is a simple case of cutting your losses or taking small gains. Repairing your strategy would be meaningful if there is significant shift in your outlook, from neutral to bullish. Suppose you expect the underlying to continue moving up. Your OTM call could be already marginally in-the-money (ITM). So, you should go long on twice the number of contracts you are currently short. That is, if you have currently short one contract, you should go long on two contracts. One long contract will cancel the short position and the other will initiate a new long position. Immediately, you must short a call just above the identifiable overhead resistance level. You would have successfully converted a short call into a bull call spread. The true cost of this spread is the net debit and the loss from closing the short call. The maximum gains from the position would be the difference between the strikes less the net debit plus the loss from the short call. Optional ReadingIt is important to determine if it will be gainful to roll a short call into a bull call spread. The process involves your revised view on the underlying, how fast the underlying is likely to move up before contract expiry and an identifiable overhead resistance level. You should also be mindful of the levels of implied volatility (compared to the previous weeks) of the strike on which you intend to set up a long position.(The author offers training programmes for individuals to manage their personal investments)Published on August 1, 2026