Bear call spread
Sell a call and buy a higher one for protection: a credit that is kept below the short strike.
Bearish2 legsCredit
Illustrative: underlying at 100, strikes every 2.5, 45 days to expiry, implied volatility 25%, model prices. One lot = 100 shares.
Key figures
| Opens for | a credit of $106 |
|---|---|
| Max profit | +$106 |
| Max loss | −$394 |
| Break-even | 106.06 |
| Position delta today | −16 shares |
| Outlook | Bearish |
The legs
| Action | Quantity | Option | Model price |
|---|---|---|---|
| Sell | 1 | 105 call, 45 days | 1.79 |
| Buy | 1 | 110 call, 45 days | 0.73 |
How it works
Sell a call and buy a higher one for protection: a credit that is kept below the short strike. A vertical spread buys one option and sells another of the same type and expiry at a different strike. The sold option pays for part of the bought one and caps the result on both sides.
When it fits
It suits a view that the underlying stays down or falls before expiry.
What can go wrong
The most it can lose at expiry in this example is −$394. Short options can be assigned early, and a sharp fall with implied volatility rising can hurt more than the expiry line suggests, which is what the crash band shows.
Building it in Trident
In the Strategy Lab, choose bear call spread and the days to expiry. Trident applies these strike rules to your live chain, prices each leg and draws the trade on the risk graph, where you can drag the days to expiry, change implied volatility or switch on the crash band. When it looks right, send it to order management; nothing reaches your broker until you send it.
Frequently asked questions
What is a bear call spread?
Sell a call and buy a higher one for protection: a credit that is kept below the short strike.
What is the maximum loss on a bear call spread?
In this illustrative example it is −$394 for one lot at expiry.
Where does a bear call spread break even?
With the underlying at 100 in this illustrative example, the break-even at expiry is 106.06.
Can I build a bear call spread in Trident?
Yes. Pick it in the Strategy Lab and Trident chooses the strikes from your live chain, prices the legs and draws it on the risk graph.
Illustrative example with model prices, not a recommendation. Options carry risk of loss. See the risk disclosure.