---
description: "A bearish capital-gain strategy (short combo hedged by a long OTM call) buying an OTM put at K1, selling an ATM call at K2, and buying an OTM call at K3, ideally structured at zero cost."
tags: [options, speculation, bearish, seagull]
---

# Bearish Long Seagull Spread

**Section**: 2.55 | **Asset Class**: Options | **Type**: Speculation

## Overview
The bearish long seagull spread is a short combo (short risk reversal) hedged against the stock price rising by buying an OTM call option. It amounts to a long position in an OTM put at K1, a short position in an ATM call at K2, and a long position in an OTM call at K3 (K1 < K2 < K3). Ideally, the trade is structured to have zero cost. The trader's outlook is bearish. This is a capital gain strategy.

## Construction
- Buy 1 OTM put option at strike K1 (lowest)
- Sell 1 ATM call option at strike K2 (middle)
- Buy 1 OTM call option at strike K3 (highest, K3 > K2 > K1)
- All same expiry; ideally zero net premium (H = 0)

Net debit or credit H

## Payoff Profile
f_T = (K1 - S_T)+ - (S_T - K2)+ + (S_T - K3)+ - H

Breakeven depends on sign of H:
- S* = K1 - H  (if H > 0)
- S* = K2 - H  (if H < 0)
- K1 <= S* <= K2  (if H = 0)

- Max profit: P_max = K1 - H  (if stock goes to zero; long put at full value)
- Max loss: L_max = K3 - K2 + H  (if stock rises above K3; net short call capped at K3)

## Key Conditions / Signals
- Bearish outlook; expects stock to fall below K1
- Ideally zero-cost (H = 0): the short call premium finances the long put
- Long call at K3 caps the upside loss from the short call at K2

## Notes
The bearish long seagull is the mirror of the bullish short seagull spread. The long call at K3 hedges the unlimited upside risk of the short call at K2, capping maximum loss at K3 - K2 + H. The maximum profit is limited to K1 - H (stock to zero).