Bear Call Spread option trading strategy is used by a trader who is bearish in nature and expects the underlying asset to dip in the near future. This strategy includes buying of an ‘Out of the Money’ Call Option and selling one ‘In the Money’ Call Option of the same underlying asset and the same expiration date. When you write a call, you receive premium thereby r
Long Combo Option Trading Strategy is implemented when a trader is bullish in nature and expects the stock price to rise in the near future. Here a trader will sell one ‘Out of the Money’ Put Option and buy one ‘Out of the Money’ Call Option. This trade will require less capital to implement since the amount required to buy the call will be covered by the amount received ..
BEAR CALL SPREAD Vs LONG COMBO - When & How to use ?
BEAR CALL SPREAD
LONG COMBO
Market View
Bearish
Bullish
When to use?
This strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.
This strategy is used when an investor Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it.
Action
Buy OTM Call Option, Sell ITM Call Option
Sell OTM Put Option, Buy OTM Call Option
Breakeven Point
Strike Price of Short Call + Net Premium Received
Call Strike + Net Premium
BEAR CALL SPREAD Vs LONG COMBO - Risk & Reward
BEAR CALL SPREAD
LONG COMBO
Maximum Profit Scenario
Max Profit = Net Premium Received - Commissions Paid
Underlying asset goes up and Call option exercised
Maximum Loss Scenario
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Underlying asset goes down and Put option exercised
Risk
Limited
Unlimited
Reward
Limited
Unlimited
BEAR CALL SPREAD Vs LONG COMBO - Strategy Pros & Cons
BEAR CALL SPREAD
LONG COMBO
Similar Strategies
Bear Put Spread, Bull Call Spread
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Disadvantage
• Limited amount of profit. • Margin requirement, more commission charges.
• Losses can keep on increasing as the price of stock goes down. • High risk strategy.
Advantages
• This strategy takes advantage of time decay. • Investors can get profit in a flat market scenario. • Investors can earn options premium income with a lower degree of risk.
• Capital investment is low and returns are high. • Unlimited reward, returns keep on increasing with the increase on stock price. • Leverage facility provided by this strategy is very beneficial.
