Option trades that generate income for you – bear call credit spread

Isn’t it nice that when you venture in the field of the exchange market, you can generate money immediately while not having to worry about the risk? That is right; there are some option trade strategies that can give you great profit while minimizing the risk. With it, the option traders do not have to stay using the typical purchasing low and then selling it high just to get a profit after the trade is closed out. As an alternative, there are certain types of spread trade strategies that are able to generate income, and some of these stances can profit from the stocks or indices that are bearish. One of the strategies is the bear call credit spread.

A bear call credit spread is an option trade strategy created to generate net income at the underlying trade. As a trader, you can keep all net proceeds until the expiration of the options especially if the situation favors you.

The term for this type of options spread is a precise and accurate connotation of this somewhat simple yet efficient trade. To fully understand this spread option, one should comprehend every word and its meaning. The bear is the stance of the trend, which is bearish. In this stance, the trend is down or flat. As a trader, you have to take a position by doing call options (this is the opposite of put option). You generate net income through credit when the trade is started. Normally, trades begin using a debit or cash outlay. With the spread, you are taking a stance between the two strike pieces. Spread is popularly known as the difference between two strike prices.

Bear call credit spreads goal is to earn income with bearish trades. The spread can limit the total income; on the other hand, the spread also limits the total risk you may have. You can generate income when you have sold one of the call options for a higher price in comparison to the price of the other call option that is bought. Finally, credit is the net difference; however, it is not free from risk.

For a successful bear call credit spread strategy, you should remember that the small losses you may have should not become big losses. To avoid problems, you must choose the right stock before entering the trade. You can train first by doing paper trading before you commit to real capital.



Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.