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

# Bearish Short Seagull Spread

**Section**: 2.56 | **Asset Class**: Options | **Type**: Speculation

## Overview
The bearish short seagull spread is a bear put spread financed with a sale of an OTM call option. It amounts to a short position in an OTM put at K1, a long position in an ATM put at K2, and a short 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
- Sell 1 OTM put option at strike K1 (lowest)
- Buy 1 ATM put option at strike K2 (middle)
- Sell 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)+ + (K2 - S_T)+ - (S_T - K3)+ - H

Breakeven depends on sign of H:
- S* = K2 - H  (if H > 0)
- S* = K3 - H  (if H < 0)
- K2 <= S* <= K3  (if H = 0)

- Max profit: P_max = K2 - K1 - H  (if S_T <= K1; bear put spread at max, put not needed)
- Max loss: L_max = unlimited  (stock rises without bound above K3; short call exposed)

## Key Conditions / Signals
- Bearish outlook; expects stock to fall below K2 toward K1
- Ideally zero-cost (H = 0): the short call premium finances the bear put spread
- Short call at K3 creates unlimited upside risk above K3

## Notes
Unlike the bearish long seagull (which buys a call to cap upside), the bearish short seagull sells a call at K3 to finance the bear put spread, resulting in unlimited upside loss. The short put at K1 caps the downside profit. Requires careful stop-loss management above K3.