Bear Call Spread
Sell a call and buy a higher-strike call to collect premium with a bearish bias and defined risk.
What is a Bear Call Spread?
A Bear Call Spread (credit call spread) sells a lower-strike call and buys a higher-strike call for protection. You collect a net credit, kept in full if the underlying stays below the short strike at expiry. The long call caps the loss. It profits from a flat-to-falling market and from time decay — the bearish counterpart to the bull put spread.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Sell 1 OTM Call (lower strike) — collect premium.
- Buy 1 further-OTM Call (higher strike) — protection.
- Net credit received = maximum profit.
When to Use It
Use when you are neutral-to-bearish and expect the underlying to stay below a resistance. Best in high-IV regimes where premium is rich and Theta plus IV mean-reversion favour the seller.
The Greeks
Negative Delta, Positive Theta, Negative Vega.
Risks & Considerations
- Loss can be a multiple of the credit if price rallies past both strikes.
- Gap-up openings can jump straight to maximum loss.
- Assignment risk on the short call if it goes ITM (stock options).
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty 20,000. Sell 20,000 CE ₹200, buy 20,400 CE ₹90. Net credit ₹110 (₹8,250 = max profit) if Nifty stays ≤ 20,000. Max loss = (400 − 110) × 75 = ₹21,750 above 20,400. Breakeven = 20,110.