Bear Call Spread

A bear call spread is a bearish options strategy that involves selling an out-of-the-money call option and buying a further out-of-the-money call option with the same underlying security and expiration date. The maximum profit for a bear call spread is the difference between the strike prices of the two options, less the premiums paid for both options. The maximum loss is limited to the premium paid for the short call option.

The break-even point for a bear call spread is the strike price of the short call option plus the premium paid for the short call option.

A bear call spread is profitable if the underlying security price decreases below the strike price of the short call option. The further the underlying security price decreases, the more profitable the bear call spread becomes.

A bear call spread is used to profit from a decline in the price of an underlying security. It is also used to hedge a long position in the underlying security.

Here is an example of a bear call spread:

* Buy a call option with a strike price of $50
* Sell a call option with a strike price of $55

The maximum profit for this bear call spread is $5, less the premiums paid for both options. The maximum loss is limited to the premium paid for the short call option, which is $5.

The break-even point for this bear call spread is $55, plus the premium paid for the short call option, which is $5.

If the underlying security price decreases below $50, the bear call spread will be profitable. The further the underlying security price decreases, the more profitable the bear call spread will become.

If the underlying security price increases above $55, the bear call spread will lose money. The maximum loss is limited to the premium paid for the short call option, which is $5.