Sunny Side Up

Sunny Side Up is the nickname tastytrade gave to a specific bullish options trade built from three parts: buying a call option at or near the current stock price, selling another call option at a higher price (together these two form a "call spread," a limited-risk bet that the stock rises), and then selling a third call option far above the current price to help pay for the first two.

The mechanics work like this: buying the near-the-money call gives you the right to profit if the stock climbs. Selling the call just above it caps how much you can make but also lowers the cost of entering the trade, since selling an option brings in premium (cash) rather than costing you money. That two-part combination is the "call spread." On its own, a call spread has a fixed, known maximum loss and maximum gain. Sunny Side Up adds a third leg — selling a call far out of the money, meaning at a strike price well above where the stock is likely to go anytime soon — to collect extra premium and reduce or even eliminate the net cost of putting the trade on.

The nuance that trips people up is that adding the third call changes the risk profile from "limited loss" to "limited loss with an added open-ended risk." Because that far-out call is sold by itself, uncovered by a corresponding purchase, a large enough rally in the stock can produce a loss beyond what the plain call spread alone would ever lose. The name plays on "sunny side up" eggs — a bullish, optimistic setup — but the structure is not simply a bullish spread; it is a bullish spread financed by taking on tail risk on the upside.

People also confuse this with a plain vertical call spread because the first two legs look identical. The distinguishing feature is always that third, unhedged short call further out, sold specifically to reduce the debit (the net amount paid) or turn the trade into a credit (money received upfront).