A Bear Call Spread is a type of options strategy used when an options trader expects a decline in the price of the underlying asset. A bear call spread is achieved by purchasing call options at a specific strike price while also selling the same number of calls with the same expiration date, but at a lower strike price. The maximum profit to be gained using this strategy is equal to the credit received when initiating the trade.A bear call spread is also called a short call spread. It is considered a limited-risk and limited-reward strategy because if shares rally above your short calls’ higher strike prices, you will lose money on both contracts (the long and short positions). However, if shares fall below your long calls’ lower strike prices, you will make money on both contracts (the long and short positions).The risk associated with this strategy is limited to the amount paid for the original calls, minus any premium received from writing additional calls. This makes it ideal for traders who are bullish on an asset, but want to protect themselves against potential downside movement.
