Bear Call Spread: Get Paid When a Stock Won't Climb (Credit Spread)
Last lesson you got paid to bet a stock would hold up. Now you flip it. The bear call spread pays you up front to bet a stock will not climb, the mirror of the bull put spread.
- How a bear call spread is built from two calls
- Your max profit, max loss, and breakeven
- Why it is the mirror of the bull put spread you just learned
- When to reach for it to get paid on a flat or falling stock
Last lesson you sold a put spread and got paid to bet Apple would hold its ground. This lesson, you have the opposite hunch. You think Apple has run far enough and is not going higher any time soon.
You already know the move. You flip to the other tool. Instead of selling puts below the price, you sell calls above it. You still collect a credit up front, time decay still works for you, and your risk is still capped. This is a bear call spread, the mirror of the bull put spread.
Getting Paid When You Think a Stock Won't Climb
Apple is at $200, and you believe it stalls or slips over the next month. You do not need a crash. You just need it to not push higher.
You sell the $200 call for $5 a share, collecting $500. That is your income leg.
You buy the $210 call for $1.30 a share, paying $130. That is your safety net above, capping what a big jump could cost you.
What You Keep, What You Risk
Same credit-spread scoreboard as last lesson, just pointed the other way. A quiet or falling Apple is your friend.
Your max profit is the credit: $370. If Apple sits at $200 or below at expiration, both calls expire worthless and you keep every dollar you collected. You win by having the stock go nowhere or down.
Your max loss is the width minus the credit: $630. If Apple climbs to $210 or higher, the full $10 width works against you, softened by the $3.70 you banked, so you lose $630. That is the floor no matter how high it goes.
Your breakeven is the strike you sold plus the credit: $203.70. As long as Apple stays below $203.70, you finish ahead. And just like last lesson, time decay chips away at the calls you are short, working quietly in your favor.
The Same Two Calls as the Bull Call Spread
You probably saw it coming. The $200 call and the $210 call are the same two calls from the bull call spread back in Lesson 2.
Just like the put spreads, this is one deal with two seats. In Lesson 2 you were the buyer, paying $370 and hoping Apple climbed past $203.70. Here you are the seller, collecting that $370 and hoping it never gets there. Same two calls, opposite chairs.
- Wins if Apple rises above $203.70
- Best case +$630
- Worst case -$370
- Wins if Apple stays below $203.70
- Best case +$370
- Worst case -$630
When I was advising clients, the people who lasted were the ones who learned to sell into other people's excitement. When a stock has run hot and everyone is sure it goes higher, calls get expensive, and selling a capped call spread against that hype can be a calm, profitable place to stand.
When a Bear Call Spread Fits
- You are bearish to neutral (you just need the stock to stall)
- A stock has run hot and looks stretched
- You want income with time decay on your side
- Call premiums are rich, so the credit is worth the risk
- You expect a breakout higher (you are on the wrong side)
- The credit is tiny next to the width you are risking
- A big event could gap the stock far above your protection
- A bear call spread sells a call and buys a higher call, for a net credit.
- You collect $370 up front and keep it if Apple stays at or below $200.
- Your max profit is the credit, $370. Your max loss is the width minus the credit, $630.
- Your breakeven is the strike you sold plus the credit: $203.70.
- It is the mirror of the bull put spread, and time decay works for you.
Pop Quiz
Three quick questions to lock it in. Pick an answer and the explanation shows up right away.
A bear call spread makes its full profit when Apple does what?
A credit spread wins when its options die worthless. If Apple stays at or below the $200 strike you sold, you keep the full $370 credit.
Apple jumps to $230. What is your loss?
The $210 call you bought caps the damage. Above $210 your loss is locked at the width minus the credit: $10 minus $3.70, which is $630.
This trade uses the same two calls as which earlier spread?
The $200 and $210 calls are the same pair from the bull call spread. You are simply on the seller's side of that exact trade now.
Bottom Line
A bear call spread pays you to bet a stock will not climb. You sell a call for income, buy a higher one to cap your risk, and keep the credit as long as the stock stays below your breakeven. A flat day, a down day, even a small up day can all be winners.
That rounds out the four building-block spreads. Two you pay for, two that pay you, all built from the same handful of strikes. Next we put them side by side and answer the real question: when should you pay, and when should you collect?
Next up: Debit Spreads vs Credit Spreads. You now know all four building blocks. The next lesson is the decision guide: when to pay for a spread, and when to get paid for one.