Build a Bear Call Spread Strategy
What is a bear call spread?
BearishLimited ProfitLimited Loss
A bearish vertical spread strategy which has limited risk and reward. It combines a short and a long call which caps the upside, but also the downside.
The goal is for the stock to be below strike A, which allows both calls to expire worthless. This strategy is almost neutral to changes in volatility. Time-decay is helpful while it is profitable, but harmful when it is losing.
(also known as: Call Credit Spread)
- Sell a call at strike A
- Buy a call at strike B