DaytradeTeam Brainzzzz

A Bear Call Spread is a medium-level difficulty options trading spread that is designed to profit from stocks that are stuck in a range or falling in price. It is the mirror spread of a Bull Put Spread, and is designed to be an income-producing strategy for stocks showing weakness.

Here are the steps to a Bear Call Spread:

1. Find a stock that you believe will be either range-bound or falling
2. Make the trade on the call options that will expire in one month OR LESS
3. Sell Lower strike calls, $5 below the higher strike price
4. Buy the same number of higher strike calls that expire on th same date...note that both calls should have strike prices that are Higher than current stock price

A good Bear Call Spread should be to get a 10-12% net credit from the trade--for example if the spread between the two strikes is $5.00, your net credit for the trade should be at least $.50. If the stock stays at current price or moves lower, the effect is that you will profit the net credit amount. Risk is limited to the difference between the strike prices minus the net credit for the complete option trade.