A bear call spread sells a call and buys a higher-strike call for protection. You collect a net credit. The trade wins if the stock stays below the short call, and the long call caps your loss if the stock rallies.
Think of it as renting out a ceiling. You are saying, 'I do not think the stock will get above this level by expiration.'
Bear call spread payoff
A defined-risk credit trade that wins if the stock stays below the short call.
Example shown: sell 105 call, buy 115 call, net credit 3.
Maximum loss is spread width minus credit.
When it fits
Use it when you are bearish or neutral and have a clear resistance level. It can also be useful after a sharp rally when option premiums are elevated and you expect the stock to stall.
Risk and reward
Your max profit is the credit collected. Your max loss is the spread width minus that credit. Because reward is limited, avoid taking tiny credits on wide spreads unless the probability and risk control are compelling.
Management
If the stock breaks resistance, respect it. Credit spreads can move from comfortable to stressful quickly. Many traders close after capturing 50-75% of the credit rather than holding to expiration.
Execution playbook
Use this section to turn the setup into a broker-screen plan: selection, follow-up action, risk limits, and reasons to skip the trade.
Key execution ideas
- Bear spreads using calls express resistance and limited upside risk.
- Selection depends on short-strike placement and credit quality.
- Follow-up action is driven by whether resistance has failed.
Before entering the order
- Sell the call above the level you believe the stock will not exceed.
- Buy a higher call to define maximum loss.
- Avoid tiny credits on wide spreads unless the probability and setup are exceptional.
Follow-up action
- Close after capturing a large share of the credit.
- Cut the trade if the stock closes above the short strike or invalidation level.
- Watch assignment risk near expiration if the short call is in the money.
Skip the trade when
- The stock is breaking out on expanding volume.
- The credit is too small relative to max loss.
- A scheduled event could gap through both strikes.
Options can lose money quickly. Treat every setup as a defined plan: entry, maximum loss, adjustment trigger, exit target, and a reason to skip the trade when pricing is not favorable.