- Bear call spread
In

finance , a**bear call spread**is a limited profit, limited risk options trading strategy that can be used when the options trader is moderately bearish on the underlying security. It is entered by buying call options of a certain strike price and selling the same number of call options of lower strike price (in the money) on the same underlying with the same expiration month.**Example**Consider an stock that costs $100 per share, with a

call option with astrike price of $105 for $2 and a call option with a strike price of $95 for $7. To implement a bear call spread, one buys the $105 call option, costing $2, and sells the $95 call option, for a profit of $7. The total profit after this initial options trading phase will be $5.After the options reach expiration, the options may be exercised. If the stock price ends at a price P below or equal to $95, neither option will be exercised and your total profit will be the $5 per share from the initial options trade.

If the stock price ends at a price P above or equal to $105, both options will be exercised and your total profit per share will be $5 from the original options trading, a loss of (P - $95) from the sold option, and a gain of (P - $105) from the bought option. Total profits will be ($5 - (P - $95) + (P - $105)) = -$5 per share (i.e. a loss of $5 per share).

**References*** cite book

last = McMillan| first = Lawrence G.

title = Options as a Strategic Investment

edition = 4th ed.

publisher = New York : New York Institute of Finance

year = 2002

id = ISBN 0-7352-0197-8**External links*** [

*http://www.optionszone.com/trade-tip-of-the-week/tradetip20070702.html Not All Call Buying is Bullish*] , OptionsZone.com

*Wikimedia Foundation.
2010.*