Bear Call Spread

Limited risk and return opportunities by buying and selling two call options.

A Bear Call Spread is an option strategy with investors combining two of their positions. They buy a cheaper call option with a higher strike price and sell a more expensive in-the-money call option with the same maturity and a lower exercise price. This strategy is put to use when investors expect moderately falling prices. By selling the call option there is a risk that investors will suffer a loss provided prices rise sharply. The risk is reduced by the purchased call option at a higher strike price and a lower option premium. Should prices decrease - as expected - investors will make a profit, since neither of the two options will be exercised. The sold option will make more money than it was paid for.

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