Strategy · 4 min read
Bear Call Spread (call credit spread)
A bear call spread (call credit spread) sells an out-of-the-money call and buys a further-OTM call as a hedge. It is a defined-risk, bearish-to-neutral strategy: you collect a net credit and profit as long as the underlying stays below the short call through expiry.
Structure and payoff
Two legs on the call side:
- Sell OTM Call — collect premium (the short strike)
- Buy further-OTM Call — caps the upside loss
When to use it
Use it when you are mildly bearish or neutral and want defined risk. Max profit is the net credit (kept if the underlying expires below the short call); max loss is the strike gap minus the credit. It is the other half of an Iron Condor.
FAQ
Is a bear call spread bullish or bearish?
Bearish-to-neutral — it profits when the underlying stays below the short call, i.e. does not rise.
What is the maximum loss?
The distance between the two strikes minus the net credit received — known up front because of the bought call.
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