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Sell Vertical Call Spread
A bearish vertical call spread consist of the purchase of a higher strike call and a sale of
lower strike call. Since the higher strike call will theoretically always be more expensive than
the higher strike call, a premium is received. It is a bearish directional strategy
with limited risk and limited reward. This spread is interrelated with the same strike put
spread as the combined value of these two spreads will equal the difference between the two
strike prices.
Breakeven point at expiration occurs when futures price equals the lower strike, plus premium paid.
Maximum profit = premium received.
Maximum loss = premium received minus the difference between strike prices.
- In The Money: Lower strike call less than futures price.
- At The Money: Lower strike call at or near futures price.
- Out Of The Money: Lower strike call is higher than futures price.
- Delta is negative. Lower prices help.
- Vega is positive. Higher implied volatility helps.
- Theta is negative. The passage of time hurts.
- Delta is always negative. Lower prices help.
- Vega may turn negative. Higher implied volatility hurts
- Theta may turn positive. The passage of time helps.
