What Is a Bear Call Spread?

A Bear Call Spread is a credit spread using Call options. You sell a lower strike Call (near the current price) and buy a higher strike Call (further OTM) to cap the risk.

• Market View: Moderately Bearish (expect price to stay below the short Call).
• Volatility View: Works best in high IV, when option premiums are rich.
• Risk/Reward: Both are limited.

🔹 Example

• Underlying: Nifty @ 20,000

Positions:

• Sell 20,000 Call = ₹200
• Buy 20,400 Call = ₹80

Net Credit = 200 – 80 = ₹120

🔹 Payoff Analysis

• Max Profit = Net Credit = ₹120
• Max Loss = Spread Width – Net Credit
  = (400 – 120) = ₹280
• Breakeven = Short Call Strike + Net Credit
  = 20,000 + 120 = 20,120

🔹 How Profit Is Achieved

1. If Nifty ≤ 20,000
   • Both Calls expire worthless.
   • You keep the entire ₹120 credit (Max Profit).
2. If Nifty ≥ 20,400
   • Short Call loses 400, Long Call gains 120.
   • Net = –280 = Max Loss.

🔹 Notes

• A Bear Call Spread is a neutral-to-bearish credit strategy.
• It profits if the underlying stays below the short Call strike.
• The risk is capped above the long Call strike.