Bear Call Spread: Earn Credit on a Bearish-to-Neutral View
A bear call spread is a credit strategy that profits if the underlying stays below a level. Here's how to build it, with max profit, loss and break-even.
Short answer: A bear call spread (a call credit spread) is built by selling a lower-strike call and buying a higher-strike call of the same expiry. You collect a net credit and profit if the underlying stays below the short strike — a defined-risk income trade for a bearish-to-neutral view.
How to build it
- Sell 1 call at a lower strike (closer to the money) — collects premium.
- Buy 1 call at a higher strike (further out) — caps the risk.
- Same expiry → net credit.
The numbers
| Metric | Formula |
|---|---|
| Net received | Credit |
| Max profit | Net credit (kept if price stays below short strike) |
| Max loss | (Higher strike − Lower strike) − Net credit |
| Break-even | Lower strike + Net credit |
When to use it
Use a bear call spread when you're bearish or neutral and want time decay on your side. You profit if the underlying falls or simply stays below your short strike. The long higher call caps the loss and reduces margin.
Related structures
- The bullish credit mirror is the bull put spread.
- For a debit bearish play, see the bear put spread.
- A bear call spread + bull put spread = an iron condor.
FAQ
Why not just sell a naked call? A naked call has open-ended risk. The long call caps your loss and margin — far safer for a defined cost.
When do I lose? If the underlying rises above your short strike; max loss is the width minus the credit. Use an MTM stop.
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