A bear call spread is an option trading strategy that is profitable for stocks that are either falling or rangebound. In an bear call spread, the trader protects a naked call position by buying a higher strike call option. Both the lower strike call that is sold, and the purchase of the higher strike call should be out of the money (OTM) to insure profits on rangebound stocks. This strategy works because the trader gets a net credit buy selling a more expensive call option and purchasing a cheaper call option (further OTM). Because both calls are OTM, if the stock falls or remains under the strike price of the short call position, both options expire worthless and the trader pockets the net credit (the difference in strike prices).
Below is the risk profile for a bear call spread:
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