What does Bear Call Spread means and when it should be used ?

A Bear Call Spread strategy involves buying Call Options and simultaneously selling Call Options. This strategy is also known as the bear credit spread. This strategy can be executed by buying 1 OTM call and selling 1 ITM call with the same expiration.

Bear Call Spread Strategy: When should it be used?

When traders expect the price of the underlying stock to fall moderately, they use the Bear Call spread strategy. This strategy has a limited profit margin and loss.

Maximum Loss = Short Call Strike price - Long Call Strike price - Net Premium Received

Max Profit = Net Premium Received

Bear Call Strategy Payoff Graph