Bear Call Spread
A bear call spread sells a lower call and buys a higher call, collecting premium you keep if the stock stays down. Learn how this bearish income trade works.
A bear call spread is a bearish trade where you sell a lower-strike call and buy a higher-strike call at the same expiration. You collect premium up front, and you keep it as long as the stock stays below the lower strike. It is a defined-risk way to earn income when you think a stock will stay flat or fall.
It is the mirror of the bull put spread, pointed downhill. You get paid to bet a stock will not rise. Let me show you.
Getting Paid to Be Bearish
This trade pays you up front, like the bull put spread, but it profits when a stock stays down instead of up. You sell a call (collecting premium) and buy a higher call (spending a little to cap your risk). The net is a credit that lands in your account when you open the trade.
Your bet: the stock stays below the call you sold. If it does, both calls expire worthless and you keep the whole credit. The higher call you bought is your insurance, capping the loss if the stock rallies hard. It is a vertical spread, and because it brings in a credit, it is a credit spread.
Watch It Work
Apple is at $200 and you think it stays flat or drifts lower. You build the spread:
- Sell the $210 call for $4 a share
- Buy the $215 call for $2 a share
- Net credit: $4 minus $2, which is $2 a share, or $200 collected now
The strikes are $5 apart. Now the outcomes.
Apple stays below $210. Both calls expire worthless. You keep the full $200 credit. That is your maximum profit, the ideal outcome.
Apple rises above $215. Both calls are in the money. The $5 strike gap works against you, but the call you bought caps it. Your max loss is the $5 gap minus the $2 credit, which is $3 a share, or $300. Bounded and known from the start.
When to Use It
A bear call spread fits when you are neutral to bearish: you think the stock will stay flat or fall, and you want to get paid for that view with a known, capped risk.
Like its bullish mirror, it profits from the stock simply not rising, so it can win even if the stock goes nowhere. It is also a safer way to be bearish with calls than a naked call, because the higher call you buy caps your risk instead of leaving it unlimited. The trade-off is the credit-spread shape: smaller wins that come often, with a larger but capped loss when you are wrong.
- A bear call spread sells a lower call and buys a higher call for a credit.
- It is neutral to bearish: you profit if the stock stays down.
- Max profit is the credit; max loss is the strike gap minus the credit.
- It is a defined-risk way to be bearish, unlike a naked call.
Pop Quiz
Three quick questions to see what stuck. Pick an answer and the explanation shows up right away.
How do you build a bear call spread?
You sell the lower call and buy the higher one, netting a credit. The bought call caps your risk.
What does this trade need to reach max profit?
It wins as long as the stock stays below the call you sold, so it can profit even in a flat market.
Why is a bear call spread safer than a naked call?
The bought call turns the unlimited risk of a naked call into a defined, capped max loss.
Bottom Line
A bear call spread pays you to be neutral-to-bearish. You sell a call and buy a higher one, collect a credit, and keep it if the stock stays below your short strike. The bought call caps your loss if the stock rallies.
It is a defined-risk income trade that can win in a flat or falling market, and a far safer way to lean bearish with calls than selling one naked.
Keep going: the general shape is the vertical spread, and the bullish credit mirror is the bull put spread.