STOCK BROKER REVIEW | INVESTING | UPCOMING IPO | ALGO TRADING | TECHNICAL ANALYSIS

Comparision (BULL PUT SPREAD VS COVERED CALL)

 

Compare Strategies

  BULL PUT SPREAD COVERED CALL
About Strategy

Bull Put Spread Option Strategy

Bull Put Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to move in an upward trend in the near future. This strategy includes buying of an ‘Out of the Money’ Put Option and selling of ‘In the Money’ Put Option of the same underlying asset and the same expiration date. When you write a Put, you will receive prem

Covered Call Option Strategy

Mr. X owns Reliance Shares and expects the price to rise in the near future. Mr. X is entitled to receive dividends for the shares he hold in cash market. Covered Call Strategy involves selling of OTM Call Option of the same underlying asset. The OTM Call Option Strike Price will generally be the price, where Mr. X will look to get out o ..

BULL PUT SPREAD Vs COVERED CALL - Details

BULL PUT SPREAD COVERED CALL
Market View Bullish Bullish
Type (CE/PE) PE (Put Option) CE (Call Option)
Number Of Positions 2 2
Strategy Level Advance Advance
Reward Profile Limited Limited
Risk Profile Limited Unlimited
Breakeven Point Strike price of short put - net premium paid Purchase Price of Underlying- Premium Received

BULL PUT SPREAD Vs COVERED CALL - When & How to use ?

BULL PUT SPREAD COVERED CALL
Market View Bullish Bullish
When to use? Bull Put Spread strategy is used when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall. An investor has a short term neutral view on the asset and for this reason holds the asset long and has a short position to generate income.
Action Buy OTM Put Option, Sell ITM Put Option (Buy Underlying) (Sell OTM Call Option)
Breakeven Point Strike price of short put - net premium paid Purchase Price of Underlying- Premium Received

BULL PUT SPREAD Vs COVERED CALL - Risk & Reward

BULL PUT SPREAD COVERED CALL
Maximum Profit Scenario Max Profit = Net Premium Received [Call Strike Price - Stock Price Paid] + Premium Received
Maximum Loss Scenario Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received Purchase Price of Underlying - Price of Underlying) + Premium Received
Risk Limited Unlimited
Reward Limited Limited

BULL PUT SPREAD Vs COVERED CALL - Strategy Pros & Cons

BULL PUT SPREAD COVERED CALL
Similar Strategies Bull Call Spread, Bear Put Spread, Collar Bull Call Spread
Disadvantage • Limited profit potential. • In loss situations, time decay may go against you. • Unlimited risk, limited reward. • Inability to earn interest on the proceed used to buy the underlying stock.
Advantages • Benefit from the time decay in profit positions but harmful in loss positions. • Profitable when underlying stock price rises, move sideways or marginal drop. • Reduce the downside risk. • Profit from option premium, rise in the underlying stock and dividends on the stock. • Allows you to generate income from your holding. • Profit when underlying stock price rise, move sideways or marginal fall.

BULL PUT SPREAD

COVERED CALL