Options Income
Bear Call Spread
A defined-risk bet that the underlying stays below a line you pick. Sell a call, buy a cheaper one further out of the money to cap the risk, and keep the credit if price never reaches your short strike.
Fill the bucket, watch the price
Set how far your short strike sits above the current price and how many days are left. Then run the clock. Each day that price stays under the short strike, the bucket fills a little more toward max profit. If the price path touches the short strike at any point along the way, the bucket spills and the trade shows its max loss instead.
Set your strike distance and days, then run the clock.
How it works
- It's a short call with the risk capped above it. Selling the lower call alone would carry open-ended risk as the stock climbs. Buying the higher call caps how far the loss can go, at the cost of a smaller net credit than selling the call by itself.
- Max profit is the credit, and it's capped there. This example uses a fixed $5-wide spread. If price finishes at or below the short strike, both calls expire worthless and the full credit is kept. There's no extra profit from the stock falling further.
- Max loss is the width between the strikes, minus the credit. If price finishes at or above the long strike, the loss is capped there no matter how much further the stock rallies. That's what the bucket shows when it spills.
- One breakeven, at the short strike plus the credit. Above that price, the position is a loser by expiration. The days-to-expiration slider controls how much the price has time to wander before the clock runs out, which is why it moves the breach odds along with the fill speed.
Where this breaks
A high probability of profit still means real losers, and they're bigger than the wins
Push the short strike further from the current price and the breach probability drops, but the credit collected shrinks along with it, while the max loss on the strikes that do get breached stays close to full width. Run the clock a few times at a tight strike distance and the bucket will spill more often than it fills, each spill costing several times what a full fill pays. The credit tells you how much a win is worth. It says nothing about how often a loss shows up, or how much bigger that loss is than the win.