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<<Could you give an example of a bear call credit spread you had done in the past??>>

Sure. Back at Christmas time I grew bearish on Sallie Mae (SLM) because I knew that the Democrats had taken control of Congress and they favored direct government lending for school loans, rather than using Sallie Mae as a middle man.

On December 20th with SLM trading right around $50, I sold the April $50 call (SLMDJ) for 2.80 and bought the April $55 call (SLMDK) for 0.75 cents for a credit of 2.05. Breakeven was 52.05. Maximum profit was 2.05/(5.00-2.05) = 2.05/2.95 = 69%.

Per my trading rules, I bought the spread back when its value fell to 50 cents. As it turns out, I should have waited since I could buy it back now for only 10 cents.

Jim

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