Name: Bear Call Spread or Vertical Spread
Setup: Sell (short) Strike A call and Buy (long) Strike B call – same expiration month for both
Bias: Neutral to bearish
Break-Even: The short strike + credit received
Max Profit: Limited: Credit received
Max Loss: Limited: Strike A – Strike B – Credit received
Margin: Margin is equal to the Max Loss: Strike A – Strike B – Credit received
Time Decay: Time decay is a positive effect as you want both sides of the spread to expire worthless
Implied Volatility: The effect of implied volatility depends on where the underlying is in relation to the strikes. If the underlying is trading near the short call then you want implied volatility to decrease. If the underlying is near the long call then you want the implied volatility to increase.
Notes: None at this time
Featured in Trade Review: None at this time
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