Compare Strategies
SHORT STRANGLE | SHORT CALL BUTTERFLY | |
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About Strategy |
Short Strangle Option StrategyThis strategy is similar to Short Straddle; the only difference is of the strike prices at which the positions are built. Short Strangle involves selling of one OTM Call Option and selling of one OTM Put Option, of the same expiry date and same underlying asset. Here the probability of making profits is more as there is a spread between the two strike prices, and if |
Short Call Butterfly Option StrategyThis strategy is opposite of the Long Call Butterfly Strategy, a trader expects the market to remain range bound in Long Call Butterfly, but here he expects the market to move beyond strike boundaries in Short Call Butterfly. If the trader is bullish on the market’s volatility, he will implement this strategy. Here also there should be equal distance between the .. |
SHORT STRANGLE Vs SHORT CALL BUTTERFLY - Details
SHORT STRANGLE | SHORT CALL BUTTERFLY | |
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Market View | Neutral | Neutral |
Type (CE/PE) | CE (Call Option) + PE (Put Option) | CE (Call Option) |
Number Of Positions | 2 | 4 |
Strategy Level | Advance | Advance |
Reward Profile | Limited | Limited |
Risk Profile | Unlimited | Limited |
Breakeven Point | Lower Break-even = Strike Price of Put - Net Premium, Upper Break-even = Strike Price of Call+ Net Premium | Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium |
SHORT STRANGLE Vs SHORT CALL BUTTERFLY - When & How to use ?
SHORT STRANGLE | SHORT CALL BUTTERFLY | |
---|---|---|
Market View | Neutral | Neutral |
When to use? | This strategy is perfect in a neutral market scenario when the underlying is expected to be less volatile. | This strategy is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc. |
Action | Sell OTM Call, Sell OTM Put | Buy 2 ATM Call, Sell 1 ITM Call, Sell 1 OTM Call |
Breakeven Point | Lower Break-even = Strike Price of Put - Net Premium, Upper Break-even = Strike Price of Call+ Net Premium | Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium |
SHORT STRANGLE Vs SHORT CALL BUTTERFLY - Risk & Reward
SHORT STRANGLE | SHORT CALL BUTTERFLY | |
---|---|---|
Maximum Profit Scenario | Maximum Profit = Net Premium Received | The profit is limited to the net premium received. |
Maximum Loss Scenario | Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received | Higher strike price- Lower Strike Price - Net Premium |
Risk | Unlimited | Limited |
Reward | Limited | Limited |
SHORT STRANGLE Vs SHORT CALL BUTTERFLY - Strategy Pros & Cons
SHORT STRANGLE | SHORT CALL BUTTERFLY | |
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Similar Strategies | Short Straddle, Long Strangle | Long Straddle, Long Call Butterfly |
Disadvantage | • Unlimited loss is associated with this strategy, not recommended for beginners. • Limited reward amount. | • Limited rewards, usually offer smaller return. • Profitability depends on the significant movement of stocks and options prices. |
Advantages | • Higher chance of profitability due to selling of OTM options. • Advantage from double time decay and a contraction in volatility. • Traders can book profit when underlying asset stays within a tight trading range. | • Even if the market is highly volatile, the risk exposure remains limited. • Without any extra investment, you can receive your premium. • Able to book profits even when the price movement cannot be predicted. |