   9: The Bear Call Spread Strategy Strategy: Bear call spread Opening the Trade: 1. "Buy to open" a call option on company X and 2. "Sell to open" a call option on company X at a strike lower than the long call Closing the Trade: 1. "Buy to close" a call option with the same strike and expiration as your short call AND "sell to close" a call option with the same strike and expiration as your long call 2. Let both options expire worthless 3. Let the short option expire worthless AND exercise the long one 4. You get exercised on the short one AND you exercise the long one Summary: This is called a Bear Call Spread, because you are bearish on the underlying stock (you think it will go down in price), you use two call options to open the trade (one you buy and one you sell), and its a spread (the call you buy protects the call you sell). In fact, this is just like being short stock, except you use two call options to do it. You profits are limited on the upside, and your losses are limited on the downside! Margin may be required to open a bear call spread. Maximum Profit: The premium you receive upon opening the spread. Maximum Loss: The difference between the two strike prices minus premium received. Breakeven: You lose money on this trade if the stock price is above the lower strike price plus premium received.  Figure 1: 55/60 Bear Call Spread on XYZ Example:
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