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Bear Call Spread

  • Buy a call, sell another call at a lower strike
  • Credit spread
  • Max profit = credit received
  • Max loss = Difference between strikes - credit received
  • Max profit below lower strike, max loss above higher strike
  • Usually larger credit means more aggressive position since it means the short call is deep in the money and stock will need a larger downward movement for profit
  • Less aggressive position will involve short call out of the money. The position will make money even if stock stays at current price.
  • A bear spread using puts might be a better strategy