A seagull combines a long ATM call (or put), a short OTM call (or put), and a short OTM put (or call) on the opposite side. Three legs total. Used to express directional bias with reduced or zero net cost, funded by the opposite-side short leg.
Bullish seagull: long ATM call, short OTM call (the upside cap), short OTM put (which funds the position via collected premium). The short put obligates buying stock at the strike if assigned — accepted as part of the structure when you'd be willing to own the underlying at that level. The position has bullish exposure between the long and short call strikes, capped above and assignment risk below.
Best for traders with directional conviction who also wouldn't mind owning the underlying at a discount. The funded structure (zero or near-zero cost) is what makes the seagull attractive vs a simple bull call spread — but the assignment risk on the short put must be accounted for in position sizing.
Frequently Asked Questions
Seagull or bull call spread?
Bull call spread costs upfront. Seagull is funded by the short put. Choose seagull when willing to own the underlying at the short put strike.
What's the worst-case loss?
The short put strike minus credit, on assignment. Effectively the cost basis of being put the stock at the short strike.