A bear call spread is a credit spread that sells a call option at a lower strike price and simultaneously buys a call option at a higher strike price on the same underlying stock or ETF, with the same expiration date.

The sold call is the income-generating leg. It benefits if the stock stays below the short call strike at expiration. The bought call at the higher strike is the protection leg. It caps the maximum loss at the spread width minus the credit received, regardless of how far the stock rises.

The net result is a credit received upfront. That credit is the maximum possible gain. The spread width minus the credit is the maximum possible loss. The position profits if the stock stays flat or falls. It loses if the stock rises above the short call strike and continues higher through the breakeven.

Using the same stock at $85 from Article 31 for direct comparison.

You sell the $90 call and buy the $95 call, both expiring in 35 days. The $90 call trades at a bid of $1.30 and the $95 call trades at an ask of $0.55. The net credit is $0.75 per share, or $75 per contract.

Maximum gain: $75 per contract. This is the full credit received if both calls expire worthless, which happens when the stock closes below $90 at expiration.

Maximum loss: $425 per contract. The spread is $5 wide. $5.00 minus $0.75 equals $4.25, or $425 per contract. This is the maximum loss if the stock closes at or above $95 at expiration.

Breakeven: $90.75. The short call strike plus the credit received. Below $90.75 at expiration, the position is profitable. Above it, losses accumulate up to the maximum.

Capital required: $425 per contract.

The bear call spread on the same stock at $85 produces a nearly identical risk-reward profile to the bull put spread, with the key difference being the directional orientation: the bear call spread is positioned above the current price while the bull put spread is positioned below it.

Strike selection for a bear call spread mirrors the bull put spread framework, applied to the upside.

The short strike targets calls in the 0.20 to 0.30 delta range above the current stock price. A short call at 0.25 delta implies approximately a 75 percent probability that the stock will stay below the short strike at expiration. The further above the current price the short call is placed, the lower the premium but the higher the probability of the full credit being retained.

The spread width follows the same logic as the bull put spread. A $5-wide spread is the standard starting point for most stocks and ETFs. The width determines the maximum loss, the capital requirement, and the income available. Wider spreads generate more absolute premium but require more capital. Narrower spreads require less capital but generate less income per contract.

One consideration specific to the bear call spread is earnings timing. If a stock has earnings within the expiration period, the bear call spread faces the same IV crush risk as any other strategy. However, a bear call spread entered before earnings when IV is elevated benefits if IV collapses after the announcement, because the credit spread narrows through vega compression as well as theta decay.

The bear call spread and the bull put spread are often discussed as alternatives. They are not always interchangeable.

Use a bull put spread when you are neutral to bullish on the stock, you want to position below the current price, and you want to earn income on an underlying you would be comfortable owning at the short put strike if the trade goes against you.

Use a bear call spread when you are neutral to bearish on the stock, you want to position above the current price, and you want to earn income while the stock holds flat or declines.

Use both simultaneously on the same underlying to create an iron condor: selling both a bull put spread below and a bear call spread above the current stock price. This combined strategy earns premium from both sides and profits when the stock stays within the defined range. Article 33 covers the iron condor in full.

The bear call spread is also particularly useful as a standalone strategy after a stock has made a significant upward move and is facing resistance or overbought conditions. Placing a bear call spread above a recent high positions the trade to benefit from the stock consolidating or pulling back, without requiring the stock to fall sharply to profit.

The same two management rules apply to the bear call spread as to the bull put spread.

Close at 50 percent of maximum profit. When the spread can be bought back for $0.38 or less (50 percent of the $0.75 credit), close the position. Place a good-till-cancelled buy-to-close order for the full spread at $0.38 immediately after the opening fill.

Close or roll at 21 days to expiration. If 21 days remain and the 50 percent target has not been reached, close outright or roll to the next monthly expiration for a net credit.

If the spread moves against you: When the stock rises toward the short call strike, consider closing the spread when it reaches two to three times the original credit received. A $0.75 credit means closing when the spread reaches $1.50 to $2.25. This prevents the position from approaching maximum loss.

What is a bear call spread and when should I use it? A bear call spread sells a call at a lower strike and buys a call at a higher strike on the same underlying and expiration, collecting a net credit upfront. It is appropriate when you have a neutral to mildly bearish view and want to earn premium income with defined maximum loss. The position profits from the passage of time, a decline in the stock, or a fall in implied volatility after entry. It is most effective when the stock has recently rallied and appears to be facing resistance, and when IVR is elevated enough to make the premium available meaningful relative to the capital required.

Can I run a bull put spread and a bear call spread on the same stock at the same time? Yes. Selling a bull put spread below the current price and a bear call spread above it simultaneously creates an iron condor. The iron condor collects premium from both spreads and profits when the stock stays within the range between the short put strike and the short call strike at expiration. The maximum gain is the combined net credit from both spreads. The maximum loss is the wider of the two spread widths minus the combined credit, since only one spread can reach maximum loss at a time. Article 33 covers the iron condor in full.

How do I choose between a bear call spread and simply buying a put? A bear call spread and a long put both profit when a stock declines, but they work very differently. The bear call spread collects a credit upfront and profits from time decay and IV compression, in addition to a stock decline. It requires the stock to stay below the short call strike, not necessarily to fall significantly. The long put requires the stock to fall below the breakeven price before expiration, and loses value every day from theta decay if the stock stays flat. For income-focused investors who believe a stock is more likely to hold or drift slightly lower than to make a decisive decline, the bear call spread is almost always the better structural choice. The long put is preferable only when you have a specific, high-conviction thesis that the stock will fall sharply within a defined time window.

📩 Want to see these trades in real time?
Subscribe to The Option Premium, my free weekly newsletter with strategies, trade breakdowns, and clear probabilities explained.

🎯 Ready to Elevate Your Options Trading?
Subscribe to The Option Premium, a free weekly newsletter delivering:
✅ Actionable strategies.
✅ Step-by-step trade breakdowns.
✅ Market insights for all conditions (bullish, bearish, or neutral).

📩 Get smarter, more confident trading insights delivered to your inbox every week.

📺 Follow Me on YouTube:
🎥 Explore in-depth tutorials, trade setups, and exclusive content to sharpen your skills.