What is a Bear Call Spread option strategy? When to use it?

Bear Call Spread meaning

A Bear Call Spread strategy is a two-leg strategy in which a Call Option is bought and a Call Option is sold at the same time. This strategy is also known as a bear call credit spread. To execute this strategy, you can Buy 1 OTM Call and Sell 1 ITM Call with the same expiration date.

When to use Bear Call Spread strategy?

The Bear Call Spread strategy is used by traders when they expect the price of the underlying asset to fall moderately. The maximum profit and loss are limited with this strategy.

Maximum loss = long call strike price - short call strike price - net premium received

Maximum profit = net premium received

Bear call spread payoff diagram