Options Education

Bear Call Option Strategy

Snapshot
Legs
Sell 1 Lower-Strike Call + Buy 1 Higher-Strike Call
Outlook
Bearish to Neutral
Max profit
Net credit received
Max Loss
Difference between strike prices minus net credit received

A bear call option strategy, often called a bear call spread, is built by selling a call option at a lower strike price and simultaneously buying another call option at a higher strike price on the same stock with the same expiration date. You collect a net credit upfront because the option you sell is more expensive than the one you buy. Traders implement this when they expect the stock price to decline or stay below the lower strike price.

The maximum profit you can earn is limited to the net credit collected when opening the trade. Your maximum loss is also capped, equal to the difference between the two strike prices minus the initial credit received. This bounded risk structure makes it a conservative choice for traders seeking income from a falling or stagnant stock price.

Example
Stock
$100
Trade
  • Sell $100 Call for $4.00
  • Buy $105 Call for $1.50
→ $2.50 credit ($250)
Breakeven
$102.50
Outcomes
  • Stock ≤ $100: +$250 Max Profit
  • Stock at $102.50: $0 Breakeven
  • Stock ≥ $105: -$250 Max Loss
Profit & loss at expiration Profit 0 Loss Stock Price → Max Profit = Net Credit Max Loss = Width − Credit
Max profit is the net credit if the stock stays below the short strike. Max loss equals the spread width minus that credit if the stock closes above the long strike.