Selling call options at a certain strike price and simultaneously buying call options on the same at a higher strike price.
Alias
Short Call Spread, Vertical Spread
Details
A bear call spread is when the trader expects the price of the underlying security to fall. It involves selling call options on the security at a certain strike price and simultaneously buying call options on the same security at a higher strike price. The trader profits if the price of the underlying security falls below the strike price of the short-call option. The maximum profit for this strategy is the difference between the strike prices of the two call options, minus the premium paid for the long call option.
A limited risk-reward-balanced bearish vertical spread strategy. This strategy is an alternative to buying a long Call (leg 2), selling a cheaper Call (Leg 1) helps offset the risk. This is what limits your risk but at the same time you limit your profits.
Breakeven
Leg 1 plus the net credit received
Sweet Spot
stock price to be at or below the Leg1 at expiration so both options expire worthless.
Max Profit
Profit is limited to the net credit received at the time of the opening option.
Max Loss
Limited Risk to the difference between Leg 1 and Leg 2, minus the net credit received.
