Bear call spread strategy

The bear call spread is a defined-risk, bearish-to-neutral options strategy that involves selling a call at one strike and buying a call at a higher strike, both with the same expiration. You collect a net credit upfront and profit if the stock stays below your short call strike.

Bias: Bearish to neutral Risk profile: Defined Ideal conditions: High IV rank, stock expected to stay below resistance, bearish or sideways outlook

How it's constructed

• Sell an OTM call at a lower strike (closer to the stock price)
• Buy an OTM call at a higher strike (further from the stock price)
• Same expiration for both legs
• Net result: credit received

The bought call caps your maximum loss, making this a defined-risk alternative to selling a naked call.

Setup example

AAPL is trading at $185. You expect it to stay below $195 through expiration. You set up a bear call spread:

• Sell the $195 call → collect $2.20
• Buy the $200 call → pay $0.90
• Net credit: $1.30 per share ($130 per spread)

Max profit, max loss, breakeven

When to use a bear call spread

Best conditions:

• You're bearish or neutral on a stock, you expect it to stay below your short strike
• IV rank is elevated, more premium inflates your credit
• The stock has clear technical resistance above your short call strike
• You want defined, capped risk without unlimited upside exposure

Avoid when:

• The stock is in a strong uptrend with momentum
• A bullish catalyst (earnings beat, positive news) is expected imminently
• IV rank is very low, the credit won't be worth the risk

Bear call spread vs bull put spread

The bear call spread and bull put spread are mirror images, both are credit spreads, both profit from the stock staying within a range. The difference is which side of the market you're selling:

• Bear call spread: Sells call premium above the stock, profits if stock stays flat or falls
• Bull put spread: Sells put premium below the stock, profits if stock stays flat or rises

In practice, volatility skew means put spreads typically collect more premium than call spreads at the same distance from the stock, due to elevated put IV. This is why bull put spreads are more commonly used in income strategies.

Managing the trade

Close at 50% profit: If you collected $1.30, close when you can buy the spread back for $0.65.

Stop loss: Consider closing if the spread reaches 2× the credit collected ($2.60), limiting your loss to roughly 40% of max loss.

Rolling: If the short call is tested, you can roll up and out, close the current spread and sell a new one at higher strikes with a later expiry, ideally for a net credit.

Related terms: Credit spread, call option, defined risk, IV rank, bull put spread, iron condor

Try it on Stryke: Screen for bearish setups and elevated IV in the Options Screener.