Bear Spreads, and What the Ceiling Costs

Intermediate · 15:40

Bearish without going naked. This lesson shows how to get paid up front for a bear spread, and why that credit is not yet your profit.

After this lesson you can

  • Work out a bear call spread's credit, breakeven and worst case, and the fixed margin it needs
  • Compare ceilings by what each one costs, and by how many months of premium one full loss erases
  • Build the bearish bet with puts for a debit, and choose credit or debit by where the strikes sit
  • Decide when to close early, and what early assignment and pin risk mean for a spread
  • Avoid the five mistakes, starting with counting the credit as money already made

Chapters

  1. 0:00A ceiling for the naked call
  2. 1:31Sell a call, buy a higher one
  3. 3:07Next to the naked call
  4. 4:55What the ceiling costs
  5. 6:23Before expiration
  6. 7:52The bear put spread
  7. 9:45Credit or debit?
  8. 11:07Managing a bear spread
  9. 12:52Five mistakes
  10. 14:10The whole lesson on one screen

Practice in the game: Level 13 · Half-Price Policy, Level 15 · Escape Hatch

In Chinese: Lesson 7 · 熊市价差

All lessons in Options Trading for Beginners →