When the Market Takes a Downturn

When the market does not look good it is best to stick with bearish strategies in options trading and one of these strategies is the bear call spread. When you see a bearish market where a small decrease in the price of an underlying stock takes place then the bear call spread is what you need.

A bear call spread is a credit spread that is made when you buy a higher strike call and you sell a lower strike call – both having the same expiration dates. This is best implemented in a stable market so that you can get high leverage over a limited range of stock prices.

Infinity trading corporation knows that this strategy has both limited profit potential and downside risk making it one of the best strategies that you can use in options trading.

Make sure that you review call option premiums by their strike prices and expiration dates. You should also investigate the implied volatility values so that you can see if the options are overpriced or undervalued.

Remember that to exit the trade in a bear call spread you will need to sell the higher strike call and purchase the lower strike call or simply let the options expire.