Bear call spread (credit): how it works
The bear call spread (credit) is one of the standard options structures. This page explains its mechanics at expiry, before charges. It is a description for learning, not a suggestion to trade it, and it does not consider your circumstances.
- How it is built
- Sell a lower-strike call and buy a higher-strike call, same expiry.
- Where it gains
- Keeps the credit if the underlying stays below the sold strike.
- Maximum loss
- Difference between the strikes minus the credit received.
- Maximum profit
- The credit received.
- Breakeven at expiry
- Sold strike + credit.
- Risks to watch
- Loss can be several times the credit; margin is required.
Things that change the picture before expiry
- Implied volatility and time decay change option prices every day, so the value before expiry differs from the expiry payoff.
- Brokerage, taxes and slippage apply to every leg when entering and exiting.
- Margin for sold options can rise during the day; a structure with defined risk still needs margin.
- Liquidity and wide spreads on far strikes can make exits costly.
Related reading
Core strategies lesson · Reading a payoff diagram · Risk management · Glossary
Practise it on paper
Load the bear call spread (credit) template in the strategy builder and watch its payoff, Greeks and risk with virtual money.
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