February 3rd, 2009
Exiting Bear Call Spreads Early
Exiting a bear call spread may not always be a bad idea. In fact some times it may work in your favor.
Most people when they sell bear call spreads intend to hold onto them until they expire. If they do and they profit you can realize your maximum gain. You also do not have to pay commissions for exiting your spread if they just expire.
But in certain conditions it is a good idea to exit a bear call spread early. When you sell an out of the money spread the premium is constantly melting away and as long as the stock is not making any upward movements.