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Bear Call Spread
bearishBear Call Spread is a bearish income strategy that could be executed when one expects the stock to find resistance at higher level
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 06-Oct-26 22450 CE | 65 | 132.45 |
| SELL NIFTY 06-Oct-26 22400 CE | 65 | 161.5 |
When To Execute?
Bear Call spread is executed when we have bearish outlook in Stock/ Index. Higher strike call outflow is funded by lower strike in the money Call. It is a net credit strategy
Trade
Buy 1 lot ATM call and Sell 1 lot deep ITM call
Advantages
Helps to generate sustain income if the view goes correct
Can be used to repair loss making Long Call by selling lower ITM Call. Develop Limited risk, limited reward strategy
Disadvantages
Identifying clear area of support and resistance is essential
If the stock closes above higher strike Call , one can lose money
Maximum Profit
Maximum reward is limited to difference between two strikes i.e. net capital inflow. Maximum Profit arises if the stock closes at or below the lower strike Call resulting in both the strike ending worthless and you pocket entire initial inflow
Maximum Loss
Maximum risk is difference between both the strikes minus credit inflow received initially. Maximum loss arises when stock closes above higher strike Call