Bear Call Spread and Bear Put Spread

Bear Call Spread: Earning from a Downward or Neutral Market 

The Bear Call Spread is a limited-risk, limited-reward strategy built for bearish or range-bound conditions. It involves: 

• Selling a call option 

• Buying another call option with the same expiry but at a higher strike price 

Since the sold call has a higher premium than the one purchased, this structure results in a net credit, representing the maximum profit. 

Example Trade (Nifty – 29 September Expiry) 

• Sell 17700 CE at ₹311.95 

• Buy 18100 CE at ₹141.70 

Net Credit = ₹311.95 – ₹141.70 = ₹170.25 
Maximum Profit per lot = ₹170.25 × 50 = ₹8,512.50 

This maximum gain is realized if Nifty expires at or below 17,700. 

Maximum Loss = (18,100 – 17,700 – 170.25) = ₹229.75 
Loss per lot = ₹229.75 × 50 = ₹11,487.50 

Margin Required: ₹33,636 

Bear Put Spread: Paying to Profit from a Down Move 

The Bear Put Spread is a strategy that profits from a fall in the price of the underlying asset. It’s set up by: 

• Buying a Put option 

• Selling another Put with the same expiration but at a lower strike price 

Since the bought Put is more expensive, the strategy results in a net debit, which is also the maximum risk. 

Example Trade (Nifty – 29 September Expiry) 

• Buy 17,900 PE at ₹463.20 

• Sell 17,500 PE at ₹275.05 

Net Debit = ₹275.05 – ₹463.20 = –₹188.15 
Maximum Loss per lot = ₹188.15 × 50 = ₹9,407.50 

This amount represents the total risk in the trade and is paid upfront. 

Maximum Profit = (17900 – 17500 – 188.15) = ₹229.75 
Profit per lot = ₹229.75 × 50 = ₹11,487.50 

Margin Required: ₹17,559 

Choosing Between Vertical Spreads 

With a grasp on all four vertical spreads  Bull Call, Bull Put, Bear Call, and Bear Put — the real question becomes: When should you use which? 

• Expecting a rise? Use Bull Call or Bull Put Spreads. 

• Anticipating a fall? Go for Bear Call or Bear Put Spreads. 

Then comes the choice between credit and debit spreads: 

• Credit Spreads (like Bear Call) are more suited for sideways or slow declines  time decay adds to profitability. 

• Debit Spreads (like Bear Put) are more effective in sharp, quick downturns — offering higher reward potential with defined risk. 

Points to Remember 

• Both Bear Call and Bear Put Spreads are structured for bearish market expectations. 

• The Bear Call is a net credit strategy; the Bear Put is a net debit strategy. 

• Use credit spreads for gradual price movements. 

• Choose debit spreads when expecting a fast and significant drop.