---
description: "A bearish vertical spread selling a lower-strike OTM call at K2 and buying a higher-strike OTM call at K1 for a net credit, profiting if the stock stays below K2."
tags: [options, income, bearish, vertical-spread]
---

# Bear Call Spread

**Section**: 2.8 | **Asset Class**: Options | **Type**: Income

## Overview
The bear call spread is a vertical spread consisting of a long position in an OTM call option with strike K1, and a short position in another OTM call option with a lower strike K2 (K2 < K1). This is a net credit trade. The trader's outlook is bearish. This is an income strategy.

## Construction
- Buy 1 call option at strike K1 (higher OTM), same expiry
- Sell 1 call option at strike K2 (lower OTM, K2 < K1)

Net credit: C = premium received for K2 call - premium paid for K1 call

## Payoff Profile
f_T = (S_T - K1)+ - (S_T - K2)+ + C

- Breakeven: S* = K2 + C
- Max profit: P_max = C  (if S_T <= K2 at expiry; both calls expire worthless)
- Max loss: L_max = K1 - K2 - C  (if S_T >= K1 at expiry)

## Key Conditions / Signals
- Bearish to neutral outlook; expects stock to remain below K2 by expiry
- Prefer when implied volatility is elevated (larger credit received)
- Income generation with defined upside risk

## Notes
The bear call spread is a credit spread. Maximum profit is limited to the net credit received. Maximum loss is the spread width minus the credit. The long call at K1 caps the loss relative to a naked short call.