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Comparision ( STRIP VS LONG CALL)

 

Compare Strategies

  STRIP LONG CALL
About Strategy

Strip Option Strategy

Strip Strategy is the opposite of Strap Strategy. When a trader is bearish on the market and bullish on volatility then he will implement this strategy by buying two ATM Put Options & one ATM Call Option, of the same strike price, expiry date & underlying asset. If the prices move downwards then this strategy will make more profits compared to short straddle because of the

Long Call Option Strategy

This is one of the basic strategies as it involves entering into one position i.e. buying the Call Option only. Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.

STRIP Vs LONG CALL - Details

STRIP LONG CALL
Market View Neutral Bullish
Type (CE/PE) CE (Call Option) + PE (Put Option) CE (Call Option)
Number Of Positions 3 1
Strategy Level Beginners Beginner Level
Reward Profile Unlimited Unlimited
Risk Profile Limited Limited
Breakeven Point Upper Breakeven Point = Strike Price of Calls/Puts + Net Premium Paid, Lower Breakeven Point = Strike Price of Calls/Puts - (Net Premium Paid/2) Strike Price + Premium

STRIP Vs LONG CALL - When & How to use ?

STRIP LONG CALL
Market View Neutral Bullish (Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.)
When to use? When a trader is bearish on the market and bullish on volatility then he will implement this strategy. This strategy work when an investor expect the underlying instrument move in upward direction.
Action Buy 1 ATM Call, Buy 2 ATM Puts Buying Call option
Breakeven Point Upper Breakeven Point = Strike Price of Calls/Puts + Net Premium Paid, Lower Breakeven Point = Strike Price of Calls/Puts - (Net Premium Paid/2) Strike price + Premium

STRIP Vs LONG CALL - Risk & Reward

STRIP LONG CALL
Maximum Profit Scenario Price of Underlying - Strike Price of Calls - Net Premium Paid OR 2 x (Strike Price of Puts - Price of Underlying) - Net Premium Paid Underlying Asset close above from the strike price on expiry.
Maximum Loss Scenario Net Premium Paid + Commissions Paid Premium Paid
Risk Limited Limited
Reward Unlimited Unlimited

STRIP Vs LONG CALL - Strategy Pros & Cons

STRIP LONG CALL
Similar Strategies Strap, Short Put Ladder Protective Put
Disadvantage Expensive., The share price must change significantly to generate profit., High Bid/Offer spread can have a negative influence on the position. • In this strategy, there is not protection against the underlying stock falling in value. • 100% loss if the strike price, expiration dates or underlying stocks are badly chosen.
Advantages Profit is generated when the share price changes in any direction., Limited loss., The profit is potentially unlimited when share prices are moving. • Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock.

LONG CALL