Bear Call Spread (Credit)

Sell a call and buy a higher call to collect premium with a bearish-to-neutral bias and defined risk.

A bear call spread (call credit spread) sells a call and buys a higher-strike call. You collect a net credit and profit if the stock stays below your short strike.

Market outlook

Neutral to bearish — you expect the stock to stay below the short call strike. You win if it falls, stays flat, or rises only slightly.

Construction

• Sell 1 call at lower strike $K_1$.
• Buy 1 call at higher strike $K_2$ ($K_2 > K_1$).
• Net credit $C = P_1 - P_2$.

Risk / reward

• Max profit: $C$, kept if the stock closes at or below $K_1$.
• Max loss: $(K_2 - K_1) - C$
• Breakeven: $\text{BE} = K_1 + C$

When to use it

• High IV, with a neutral-to-bearish view and a desire for defined risk.
• Selling above a clear resistance level so the short strike has room.

Risks & management

• The mirror of the bull put spread; manage the same way (take ~50% profit, defend the short strike).
• Assignment risk on the short call rises if it goes deep ITM near expiry, especially around ex-dividend dates.