Bear Call Spread
The next type of vertical spread is called a bear call spread . A bear call
spread is a short call combined with a long call that has a higher strike
price. Both calls are on the same underlying and share the same expiration
month. In this case, the call being sold is the option of higher value. This
call spread results in a net credit when the trade is put on and, therefore, is
called a credit spread.
The bull call spread and the bear call spread are two sides of the same
coin. The difference is that with the bull call spread, one is buying the call
spread, and with the bear call spread, one is selling the call spread. An
example of a bear call spread can be shown using the same trade used
earlier.
Here we are selling one AAPL February (40-day) 395 call at 14.60 and
buying the 405 call at 10.20. We are selling the 395–405 call at $4.40 per
share, or $440.
Exhibit 9.4 is an at-expiration diagram of the trade.