What is a bear call spread?
A bear call spread, or short call vertical, is a credit trade. You sell a call above the current price and buy a further call to cap the risk.
The long call is insurance. It costs part of the credit and converts an unlimited upside risk into a fixed one — the strike width minus what you collected.
When traders use it
Traders sell call spreads for a neutral-to-bearish view with time on their side.
- You think the stock stalls below a resistance level.
- Call premium looks rich after a rally.
- You want a defined-risk short without holding stock.
The P/L shape
The payoff is flat and positive below the short strike, ramps down between the strikes, and is flat again above.
Worked example. XYZ trades at $100. You sell the $105 call and buy the $110 call for a credit of $1.40, or $140.
- Max profit
- $140 — the credit, if XYZ closes at or below $105
- Max loss
- $360 — the $500 strike width minus the credit
- Breakeven
- $106.40 — short strike plus the credit
Anything at or under $105 pays the same $140. A close at $107.50 gives back part of the credit; anything at or above $110 costs you the full $360.
Greeks and time decay
Net delta is negative and grows as the stock climbs toward the short call. A quiet drift down or sideways is what the position wants.
Theta is positive and does the work. Vega is negative — a volatility spike inflates both calls and moves the spread against you before price has even settled.
Build it in DeltaForm
- Open the builder and choose the symbol and expiration.
- Add a short call above the current price.
- Add a long call at a higher strike, same expiration.
- Confirm the credit and read the breakeven off the curve.
- Move the date forward to watch decay pull the spread toward zero.
Frequently asked questions
Can I be assigned early on the short call?
Yes, most often the day before an ex-dividend date when the call is in the money. Your long call still bounds the position. Assignment is handled by your broker, not by DeltaForm.
Is this the same as a covered call?
No. A covered call is backed by 100 shares. A bear call spread is backed by a further call, needs no stock, and ties up much less capital.
How much credit should I look for?
A common rule of thumb is around a third of the strike width. Below that the reward rarely justifies the risk; well above it usually means the short strike is too close to the money.