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Bear Call Spread Vs Bear Put Spread Options Trading Strategy Comparison

Compare Bear Call Spread and Bear Put Spread options trading strategies. Find similarities and differences between Bear Call Spread and Bear Put Spread strategies. Find the best options trading strategy for your trading needs.

Bear Call Spread Vs Bear Put Spread

  Bear Call Spread Bear Put Spread
Bear Call Spread Logo Bear Put Spread Logo
About Strategy A Bear Call Spread strategy involves buying a Call Option while simultaneously selling a Call Option of lower strike price on same underlying asset and expiry date. You receive a premium for selling a Call Option and pay a premium for buying a Call Option. So your cost of investment is much lower. The strategy is less risky with the reward limited to the difference in premium received and paid. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear call credit spread as a net credit is received upon entering the trade. The risk and reward both are limited in the strategy. How to use the bear call spread options strategy? The bear call spr... Read More The Bear Put strategy involves selling a Put Option while simultaneously buying a Put option. Contrary to Bear Call Spread, here you pay the higher premium and receive the lower premium. So there is a net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear put debit spread as a net debit is taken upon entering the trade. This strategy has a limited risk as well as limited rewards. How to use the bear put spread options strategy? The bear put spread strategy looks like... Read More
Market View Bearish Bearish
Strategy Level Beginners Advance
Options Type Call Put
Number of Positions 2 2
Risk Profile Limited Limited
Reward Profile Limited Limited
Breakeven Point Strike Price of Short Call + Net Premium Received Strike Price of Long Put - Net Premium

When and how to use Bear Call Spread and Bear Put Spread?

  Bear Call Spread Bear Put Spread
When to use?

The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.

The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.

Market View Bearish

When you are expecting the price of the underlying to moderately go down.

Bearish

When you are expecting the price of the underlying to moderately drop.

Action
  • Buy OTM Call Option
  • Sell ITM Call Option

Let's assume you're Bearish on Nifty and are expecting mild drop in the price. You can deploy Bear Call strategy by selling a Call Option with lower strike and buying a Call Option with higher strike. You will receive a higher premium for selling a Call while pay lower premium for buying a Call. The net premium will be your profit. If the price of Nifty rises, your loss will be limited to difference between two strike prices minus net premium.

  • Buy ITM Put Option
  • Sell OTM Put Option

Breakeven Point Strike Price of Short Call + Net Premium Received

The break even point is achieved when the price of the underlying is equal to strike price of the short Call plus net premium received.

Strike Price of Long Put - Net Premium

The breakeven point is achieved when the price of the underlying is equal to strike price of long Put minus net premium.

Compare Risks and Rewards (Bear Call Spread Vs Bear Put Spread)

  Bear Call Spread Bear Put Spread
Risks Limited

The maximum loss occurs when the price of the underlying moves above the strike price of long Call.

Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received

Limited

The maximum loss is limited to net premium paid. It occurs when the price of the underlying is less than strike price of long Put..

Max Loss = Net Premium Paid.

Rewards Limited

The maximum profit the net premium received. It occurs when the price of the underlying is greater than strike price of short Call Option.

Max Profit = Net Premium Received - Commissions Paid

Limited

The maximum profit is achieved when the strike price of short Put is greater than the price of the underlying..

Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid.

Maximum Profit Scenario

Underlying goes down and both options not exercised

Underlying goes down and both options exercised

Maximum Loss Scenario

Underlying goes up and both options exercised

Underlying goes up and both options not exercised

Pros & Cons or Bear Call Spread and Bear Put Spread

  Bear Call Spread Bear Put Spread
Advantages

It allows you to profit in a flat market scenario when you're expecting the underlying to mildly drop, be range bound or marginally rise.

Risk is limited. It reduces the cost of investment.

Disadvantage

Limited profit potential.

The profit is limited.

Simillar Strategies Bear Put Spread, Bull Call Spread Bear Call Spread, Bull Call Spread
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