Bear Call Spread

A call sold with a higher call bought in the same expiration: it opens for a credit, kept in full while the underlying stays below the short strike, with the loss capped.

Also called Short call spread, Call credit spread

Outlook

Bearish

Family

Credit Spread

Level

Intermediate

Legs

2 legs

Expirations

1 expiration

Opens for

Credit

Maximum profit

Limited

Maximum loss

Limited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
A	Short	Call 105	1	Delta 30
B	Long	Call 110	1	5.00 points further out of the money than A

What it is

A call sold at A and a further out-of-the-money call bought at B, in the same expiration. It opens for a credit, and that credit is the maximum gain.

The long call at B is the entire point of the structure. A short call on its own has no upper bound on its loss; adding the long call above it fixes the worst case at the distance between the strikes.

The payoff

At expiration

At expiration the position keeps the full credit below the short strike A, falls in a straight line between A and B, and is flat at its maximum loss above B.

• Below A — both calls expire worthless, the credit is kept.
• Between A and B — the short call is in the money and the long one is not; the result slides from maximum gain to maximum loss.
• Above B — both are in the money, the spread is worth its full width, and the loss is fixed at (B − A) less the credit.

Break-even is A plus the credit.

How it behaves before expiration

Today, before expiration

Today's value is a shallow curve between the two flat regions, well inside the sharp corners of the expiration line.

Flatter than the expiration line, with rounded corners: the two legs’ time values largely offset, so the position moves slowly until expiry approaches.

The Greeks

Delta is negative and smaller in magnitude than the short call alone.

Gamma is negative near A and positive near B, so the two partly cancel — the reason the position does not accelerate the way an uncovered short call does.

Theta is positive and modest.

Vega is negative and small: both legs reprice together when volatility moves.

Where it lives in the volatility environment

Practitioners generally note that call premiums on equity indices are lower than put premiums at the same distance from the money — the skew — so a call credit spread of a given width typically brings in less than a put credit spread of the same width. The maximum loss is set by the width either way.

What can go wrong

• Assignment on the short call leaves a short share position per contract, which carries borrow costs and dividend liability until it is resolved.
• Early assignment before a dividend is the specific case: a deep in-the-money short call is most at risk the day before the ex-dividend date.
• The loss arrives at B, not at infinity, and it is the width less the credit — bounded, not small.
• Pin risk at A leaves assignment uncertain over a weekend.
• A partially closed spread is an uncovered short call, with the unbounded risk that structure carries.

Building it in Option Panel

Open Build Strategy and pick Bear Call Spread. The builder seeds the short call at A and the long call at B, with strikes by delta, percentage out of the money, an offset from the other leg, an exact strike, or a target credit for the pair.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Short Call — the same view without the long wing, and without the bound on the loss.
• Bull Put Spread — the same structure on the put side, for the opposite view.
• Bear Put Spread — the same view paid for as a debit.