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Bear call spread: it pays if the price doesn’t rise, but time helps only below about $107.50

See which way time pushes this call credit spread at different prices, and why “time is helping” and “you will make money” are not the same thing.

Bear call spread · Sell 1 105 Call / Buy 1 110 Call · 30 days

Open in the full Lab
TodayDay 30
Day 1515 days to expiration · 15d left
IV shift
P&L+$40

Time-slice chart

5 scenarios from Today to Day 30. If the price stays at 100, P&L goes from $0 to +$101. If the price stays at 105, P&L goes from −$95 to +$101. If the price stays at 107.5, P&L goes from −$148 to −$149. If the price stays at 110, P&L goes from −$200 to −$399. If the price stays at 115, P&L goes from −$288 to −$399. Cursor on Day 15.

Left and right arrows change the day; up and down switch the scenario price.

Price-slice chart

P&L across prices $74.00 to $126.00. At expiration: breakeven $106.01, max profit +$101, max loss −$399. On Day 15 at $100.00: +$40.

Left and right arrows move the price.

P&L heatmap

LossProfit

Time-effect map

Time hurtsTime helps

At $100.00 · Day 15

Upside left to expiration

+$61

Downside left to expiration

−$439

From +$40 now · If the price stays at $100.00: +$61 · Upside to downside 0.1 : 1

Position at expiration

Max profit

+$101

At $105.00 or below

Max loss

−$399

At $110.00 or above

Breakeven

$106.01

At expirationDay 15: $102.06

All figures are Black-Scholes model estimates, not market quotes or guarantees.

P&L by price and day (model estimate, current price 100, IV 30%, 30 days)

P&L by price and day (model estimate, current price 100, IV 30%, 30 days)
Underlying priceDay 0Day 7.5Day 15Day 22.5Day 27Day 30
100$0+$16+$40+$74+$97+$101
105−$95−$87−$75−$50−$10+$101
107.5−$148−$148−$149−$149−$150−$149
110−$200−$208−$220−$246−$287−$399
115−$288−$305−$329−$365−$393−$399

Structure, capital, and P&L at expiration

A bear call spread has two legs: you sell a call with a strike of 105 and buy a call with a strike of 110, both expiring in 30 days. Every number on this page assumes a current price of $100, implied volatility (IV) of 30%, a 4% risk-free rate, no dividends, 30 days to expiration, and one contract per leg.

The 105 call brings in $1.66 a share and the 110 call costs $0.66, for a net credit of $100.68.

  • Max profit: $100.68, the credit, kept at $105 or below.
  • Max loss: $399.32, at $110 or above: the $500 width less the credit.
  • Breakeven: $106.01.

Brokers typically require margin equal to the max loss, $399.32, while the spread is open. At entry, Delta is −16.12 and the instantaneous Theta is +$1.87 a day.

Time profile

  • At $100, the price unchanged, time pays steadily: +$40 by day 15, +$97 by day 27, +$101 at expiration. Only 27% of the gain arrives in the last 7.5 days.
  • At $105, the short strike, the position starts at −$95 and turns positive only on day 27.6. 77% of the gain arrives in the last 7.5 days.
  • At $107.50, the midpoint, time changes almost nothing: about −$148 to −$149.
  • At $110, time costs money: −$200 to −$399, 77% of it in the last 7.5 days.
  • At $115, above both strikes, the loss grows from −$288 to −$399.

“Time is helping” is not “you will make money”: between $106.01 and $107.40

The time-neutral price runs from $107.37 on day 0 to $107.44 on day 15, $107.49 on day 27, and $107.53 with 1 day left. Below it, the next-day change is positive; above it, negative.

That line sits above the breakeven of $106.01. Between the two, time and the final result point in opposite directions: each day shrinks the loss, but the spread still loses money at expiration. At $106.50, the position shows −$126 on day 0, −$119 on day 15, −$89 on day 27, and −$49 at expiration.

Near expiration: the $5 between the strikes is magnified

Early on, the $5 between the strikes moves the P&L only moderately. On day 0, $105 shows −$95 and $110 shows −$200, a gap of $105.

As expiration approaches, the spread’s value moves toward one of its two limits, and the same $5 of price decides which. On day 27 the gap is $277 (−$10 against −$287); at expiration it is the full $500 (+$101 against −$399).

Try it in the Lab: three experiments

  1. The link adds a $106.50 scenario line. Watch it narrow from −$126 on day 0 to −$49 at expiration: time is helping the whole way, and the position still ends with a loss.

    Open in the Lab

  2. Compare the gap between the $105 and $110 lines on day 0 and on day 27 (the cursor opens on day 27): $105 apart at the start, $277 apart on day 27.

    Open in the Lab

  3. Open the time-effect map and check that the time-neutral line is almost horizontal: it stays between $107.37 and $107.53 from day 0 to the last day.

    Open in the Lab

Three common misconceptions

  • MisconceptionA bear spread only pays if the price falls.

    What the numbers showWith the price unchanged at $100, it earns the full +$101 at expiration. At $97 it is also +$101: a further drop adds nothing.

  • MisconceptionTime is helping, so the trade will make money.

    What the numbers showAt $106.50, time narrows the P&L from −$126 to −$49, and it is still a loss at expiration.

  • MisconceptionThe closer to expiration, the steadier the P&L.

    What the numbers showThe P&L gap between $105 and $110 is $105 on day 0 (−$95 against −$200) and widens to $277 on day 27 (−$10 against −$287).