Bear Call Spread

A bear call spread collects premium upfront and profits when the stock stays flat or falls. You sell a call at a lower strike and buy a call at a higher strike, capping both your profit and your risk.

How a Bear Call Spread Works

You sell a call at or above the current stock price and simultaneously buy a call at a higher strike. The sold call brings in premium. The bought call costs less but limits your loss if the stock surges. The net result is a credit in your account — money you keep if the stock closes below your short call strike at expiration.

This is the call-side equivalent of a bull put spread. Both are credit spreads that profit from the stock staying within a range. The bear call spread profits specifically when the stock doesn't rise above your short call.

Example: A stock is at $100. You sell the $105 call for $2.00 and buy the $110 call for $0.75. Net credit: $1.25 per share ($125 total). If the stock closes below $105 at expiration, both calls expire worthless and you keep $125. If it rises to $112, you lose the maximum: ($5 spread − $1.25 credit) × 100 = $375.

Maximum Profit, Maximum Loss, and Breakeven

Maximum profit: The net credit received. In the example, $125. Achieved when the stock closes below the short call strike at expiration.

Maximum loss: (Spread width − credit received) × 100. In the example: ($5 − $1.25) × 100 = $375. Achieved when the stock closes above the long call strike.

Breakeven: Short call strike plus net credit. In the example: $105 + $1.25 = $106.25. The stock needs to stay below $106.25 for the trade to profit.

When to Use a Bear Call Spread

You expect the stock to stay flat or decline. Unlike a long put — where you need the stock to actually fall — a bear call spread wins as long as the stock doesn't rise above your short strike. This makes it more forgiving for a mildly bearish or neutral view.

Implied volatility is elevated. Selling a call spread during high IV means collecting more premium. IV crush after an event benefits the seller even if the stock moves slightly against you.

You want to sell premium against a stock that's been running up. A stock that's hit resistance, had a sharp rally, or is approaching a known overhead level is a natural candidate for a bear call spread placed above that resistance.

When Not to Use It

You're strongly bearish. The bear call spread caps your profit at the premium received. If you expect a significant decline, a long put or bear put spread profits from that move — a credit spread does not.

Earnings or a major catalyst is imminent. A large upside move can blow through your short strike quickly. If the risk is a surprise positive outcome, your spread could reach its maximum loss in a single session.

Frequently Asked Questions

What's the difference between a bear call spread and a bear put spread?
Both are bearish strategies, but they're structured differently. A bear put spread is a debit spread — you pay to enter and profit directly from the stock falling. A bear call spread is a credit spread — you collect premium and profit from the stock not rising. The bear put spread has more directional profit potential. The bear call spread is more forgiving because the stock can stay flat and you still win.

Is the bear call spread the same as a short call spread?
Yes — different names for the same position. "Bear call spread" describes the market view. "Short call spread" describes the structure (you're net short calls). Both mean the same thing.

What strike should I sell for a bear call spread?
Most traders sell the short call at or just above a key resistance level — a price the stock has failed to break through. Selling at-the-money or in-the-money calls brings in more premium but gives you less room for error.