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Calculate a bearish call credit spread13 minute read
Bear call spread max profit, loss, and break-even
Calculate bear call spread maximum profit, maximum loss, expiration break-even, fees, buying power, dividend risk, and short-call assignment outcomes.
Prepared by Mark · Primary sources below
Direct answer
A bear call spread sells a lower-strike call K1 and buys a higher-strike call K2 in one expiration, where K1 < K2. Let C be the net credit per share before costs. Maximum expiration profit is C. Maximum loss is K2 - K1 - C. Break-even is K1 + C. Multiply by the contract multiplier and quantity and include commissions, exercise or assignment costs, and any stock financing.
Calculate credit from a simultaneous order
Subtract the price paid for the higher protective call from premium received for the lower short call. A package fill is stronger evidence than leg last prices that may be stale or crossed at different times.
If the short 100 call brings 3.10 and the long 105 call costs 1.30, C is 1.80 per share, or 180 for one standard spread before costs.
Maximum profit occupies the lower expiration region
At or below K1, both calls can expire without intrinsic value and the entire 1.80 credit remains. This is the maximum gross profit, not a yield guaranteed at entry.
As price rises above K1, the short call develops intrinsic loss. The credit absorbs that loss until break-even at 101.80.
The higher call caps the rising-price loss
At or above K2, the difference between call intrinsic values equals the 5.00 strike width. The initial credit reduces the terminal obligation, producing maximum loss of 3.20 per share or 320 per standard spread before costs.
Between strikes, expiration P&L is C minus stock price plus K1. Check signs directly; adding credit to the wrong strike is a common spreadsheet error.
Risk-adjusted return is more than credit divided by margin
For N spreads and multiplier M, maximum profit is C × M × N and maximum loss is (K2 - K1 - C) × M × N. Costs reduce the first and enlarge the second.
Broker buying power can differ from economic maximum loss, especially after assignment or for nonstandard deliverables. Position sizing should use stress cash needs and concentration as well as the displayed requirement.
Dividends and expiration can change the path
Before expiration, the spread price depends on spot, time value, IV, skew, rates, dividends, and both markets. Crossing the formula break-even does not determine current P&L.
The short call can be assigned early, often when dividend economics make exercise attractive, creating short stock while the long call remains open. Pin risk near K1 can also leave an uncertain post-expiration position.
Common questions
What is the bear call spread maximum-loss formula?
Take the higher long-call strike minus the lower short-call strike and subtract the opening net credit per share. Multiply by contract multiplier and spread count, then add relevant costs. For a matched same-expiration position, maximum intrinsic loss occurs at or above the long-call strike at expiration.
How is bear call spread break-even calculated?
Add the opening per-share net credit to the lower strike of the short call. Between the strikes at expiration, the short call's intrinsic loss is stock price minus K1 while the long call is still worthless. Profit becomes zero when that loss equals C, giving K1 + C before fees. Earlier break-even is not fixed because time value remains.
Why can a bear call spread lose before price reaches break-even?
The break-even formula describes the final intrinsic payoff only. Before expiration, a stock rally, higher implied volatility, skew changes, dividend expectations, or wide markets can increase the amount required to buy back the spread even below K1 + C. The mark also depends on whether it uses midpoint, natural prices, or an executable combination quote.
Does the long call prevent every assignment problem?
It caps the matched terminal payoff but is not automatically exercised whenever the short call is assigned early. Assignment can create short shares, dividend liability, margin needs, financing costs, and overnight exposure while the long option remains. Traders must choose whether to close stock, exercise the long call, or close the entire spread under broker and tax rules.
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