Bear Calendar Spread Strategy

The bear calendar spread strategy is the opposite of a bull calendar spread and consists of two options: a long put option and a short put.

You would deploy this strategy if you think the long term outlook for any particular underlying asset is bearish (heading for a downturn).

Here’s how it’s constructed:

Sell 1 Near-Term Out of the Money (OTM) Put – Buy 1 Long-Term Out of the Money (OTM) Put

When you enter a bearish calendar spread, you must pay for the long put option but you receive a premium for selling the short put option.

Maximum Potential Profit

If the near month options expire worthless, this strategy turns into a discounted short put strategy, so the upside profit potential for the bear calendar spread becomes unlimited.

Maximum Potential Loss

The maximum possible loss for the bear calendar spread is limited to the initial debit taken to put on the spread. This happens when the stock price goes up and stays up until the expiration of the longer term put.

Bull Calendar Spread Example

Let’s say its May and Apple (AAPL) stock is trading at $40, you decide this is overvalued and the price is likely to fall over the next three months. So you enter a bear calendar spread by buying an SEP 35 out-of-the-money call for $200 and writing a JUN 35 out-of-the-money call for $100. The net investment required to put on the spread is $100.

In June, the stock price of AAPL has fallen to $35 and the JUN 35 call expires worthless. Subsequently, the price of AAPL stock has fallen to $29 by September. The SEP 35 call expires in the money and is worth $400 upon expiration. Since the initial debit taken to enter the trade is $100, your profit comes to $300.

Now let’s look at what happens if the stock price doesn’t rise and remains at or above $35 until the expiration of the longer term put in September. In this case you’ll lose the initial debit of $100 as both calls expire worthless.


To help keep it simple we’ve left broker commissions out of the above example. When you trade in the real world the above trade would be subject to broker commissions. This is a nominal amount, usually around $10 or $20 from a traditional retail options broker like optionsXpress.

When you get a little more experience however you’ll want to try out a few more complex strategies that involve 3 or more individual contracts. Fortunately there are brokers that specialize in this kind of trade. OptionsHouse is an excellent example, since they have commissions starting at $0.15 per contract (+$8.95 per trade) for frequent traders.


As you can see the bear calendar spread is an easy strategy to master, on top of that it also has unlimited profit potential with limited risk. This makes it along with its sister the bull calendar spread the perfect strategy for beginners to learn.

Just remember to carry out a test trade in your virtual account first. That way you’ll have a better idea of how it’s constructed and how the theory works. The very worst thing you can do when you’re just starting out is trade blind.