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In options trading, a bear spread is a bearish, vertical spread options strategy that can be used when the options trader is moderately bearish on the underlying security.

Because of put–call parity, a bear spread can be constructed using either put options or call options. If constructed using calls, it is a bear call spread (alternatively call credit spread). If constructed using puts, it is a bear put spread (alternatively put debit spread).

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 security with the same expiration month.

### Example

Consider a stock that costs \$100 per share, with a call option with a strike 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, paying a premium of \$2, and
• sells the \$95 call option, making a premium 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 is equal to the sum of \$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). The loss is due to speculation that the price would go down but it actually did not.