Bear Call Spread

A Bear Call Spread involves selling a call option at a lower strike price and buying a call option at a higher strike price. It profits from a moderate price decline or stability.

• Ideal for moderately bearish conditions, where price is expected to stay below the lower strike price.
• Selling a slightly OTM call generates premium income, while buying a higher strike call limits losses.
• Risk is capped at the difference in strike prices minus the net premium received.

Example:

• NIFTY trading at 18,000.
• Sell 18,200 Call at ₹100 and buy 18,400 Call at ₹50 (lot size = 50).
• Outcome:
  1. If NIFTY stays below 18,200 at expiry:
     • Both options expire worthless.
     • Net profit = ₹2,500 (premium collected).
  2. If NIFTY rises to 18,300 at expiry:
     • Loss on sold call = ₹100 × 50 = ₹5,000.
     • Gain on bought call = ₹50 × 50 = ₹2,500.
     • Net loss = ₹5,000 − ₹2,500 − ₹2,500 = ₹0.
  3. If NIFTY rises to 18,500 at expiry:
     • Loss on sold call = ₹300 × 50 = ₹15,000.
     • Gain on bought call = ₹100 × 50 = ₹5,000.
     • Net loss = ₹15,000 − ₹5,000 − ₹2,500 = ₹7,500.