Compare Strategies
COVERED COMBINATION | BULL CALL SPREAD | |
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About Strategy |
Covered Combination Option StrategyThis strategy involves selling OTM Call & Put Options and buying the underlying asset in either cash or futures market. It is also known as Covered Strangle as the profits are capped and risk is potentially unlimited. Risk: Un |
Bull Call Spread Option StrategyBull Call Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to give decent returns in the near future. This strategy includes buying of an ‘In The Money’ Call Option and selling of ‘Deep Out Of the Money’ Call Option of the same underlying asset and the same expiration date. .. |
COVERED COMBINATION Vs BULL CALL SPREAD - Details
COVERED COMBINATION | BULL CALL SPREAD | |
---|---|---|
Market View | Bullish | Bullish |
Type (CE/PE) | CE (Call Option) + PE (Put Option) | CE (Call Option) |
Number Of Positions | 2 | 2 |
Strategy Level | Advance | Beginners |
Reward Profile | Limited | Limited |
Risk Profile | Unlimited | Limited |
Breakeven Point | (Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2 | Strike price of purchased call + net premium paid |
COVERED COMBINATION Vs BULL CALL SPREAD - When & How to use ?
COVERED COMBINATION | BULL CALL SPREAD | |
---|---|---|
Market View | Bullish | Bullish |
When to use? | This strategy is mainly suited for investors who are moderately bullish on a stock and are comfortable with increasing their position in the event of a price decline. | This strategy is used when an investor is Bullish in the market but expect the underlying to gain mildly in near future. |
Action | Sell 1 OTM Call, Sell 1 OTM Put | Buy ITM Call Option, Sell OTM Call Option |
Breakeven Point | (Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2 | Strike price of purchased call + net premium paid |
COVERED COMBINATION Vs BULL CALL SPREAD - Risk & Reward
COVERED COMBINATION | BULL CALL SPREAD | |
---|---|---|
Maximum Profit Scenario | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received - Commissions Paid | (Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid |
Maximum Loss Scenario | Purchase Price of Underlying + Strike Price of Short Put - (2 x Price of Underlying) - Max Profit + Commissions Paid | Net Premium Paid |
Risk | Unlimited | Limited |
Reward | Limited | Limited |
COVERED COMBINATION Vs BULL CALL SPREAD - Strategy Pros & Cons
COVERED COMBINATION | BULL CALL SPREAD | |
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Similar Strategies | Stock Repair Strategy | Collar |
Disadvantage | Combinations can be profitable in sideways or rising markets. Greater combined net credit increases downside protection and potential return. | • Limited profit potential to the higher strike call sold if the underlying stock price rises. • Maximum profit only if stock rises to the higher of 2 strike prices selected. |
Advantages | Limited Maximum Profit on the upside. Covered Combinations should only be traded on stocks that are bullish. | • Allows you to reduce risk and cost of your investment. • When placing the spread, exit strategy is pre-determined in advance. • Risk is limited to the net premium paid. |