From Barchart:

A bear call spread involves selling a call option with a higher strike price and buying a call option with a lower strike price. This strategy profits when the stock price remains below the higher strike price. It’s a limited risk, limited reward strategy often used in a bearish market outlook.

In a bear call spread, the maximum profit is the net premium received when the trade is initiated. The maximum loss is capped at the difference between the two strike prices minus the net premium received. This strategy is favored when the investor believes the stock price will remain below the higher strike price.

A bear call spread can be an effective strategy in a declining or sideways market, as it allows for potential profit in both scenarios. By selling the higher strike call option, the investor can generate income from the premium, while the lower strike call option provides a hedge against potential losses. It’s a popular choice for traders with a bearish outlook and a desire for limited risk.



Read more: Bear Call Spread Screener Results for February 7th