RISK REVERSAL	COVERED COMBINATION
About Strategy	Risk Reversal Option Strategy This strategy protects an investor from unfavourable price movements in the position but limits the profits can be made on that position. A risk reversal is a hedging strategy that protects a long or short position by using put and call options. In this one option is buying and other is written. In this strategy the trader has to pay a premium, while the written option prod Read more..	Covered Combination Option Strategy This 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 .. Read more..

RISK REVERSAL Vs COVERED COMBINATION - Details

	RISK REVERSAL	COVERED COMBINATION
Market View	Bullish	Bullish
Type (CE/PE)	CE (Call Option) + PE (Put Option)	CE (Call Option) + PE (Put Option)
Number Of Positions	2	2
Strategy Level	Advance	Advance
Reward Profile	Unlimited	Limited
Risk Profile	Unlimited	Unlimited
Breakeven Point	Premium received - Put Strike Price	(Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2

RISK REVERSAL Vs COVERED COMBINATION - When & How to use ?

	RISK REVERSAL	COVERED COMBINATION
Market View	Bullish	Bullish
When to use?	This strategy can be used for hedging. When an investor want to protect long or short position by using a call and put option.	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.
Action	This strategy work when an investor want to hedge their position by buying a put option and selling a call option.	Sell 1 OTM Call, Sell 1 OTM Put
Breakeven Point	Premium received - Put Strike Price	(Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2

RISK REVERSAL Vs COVERED COMBINATION - Risk & Reward

	RISK REVERSAL	COVERED COMBINATION
Maximum Profit Scenario	You have unlimited profit potential to the upside.	Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received - Commissions Paid
Maximum Loss Scenario	You have nearly unlimited downside risk as well because you are short the put	Purchase Price of Underlying + Strike Price of Short Put - (2 x Price of Underlying) - Max Profit + Commissions Paid
Risk	Unlimited	Unlimited
Reward	Unlimited	Limited

RISK REVERSAL Vs COVERED COMBINATION - Strategy Pros & Cons

	RISK REVERSAL	COVERED COMBINATION
Similar Strategies	-	Stock Repair Strategy
Disadvantage	Unlimited Risk.	Combinations can be profitable in sideways or rising markets. Greater combined net credit increases downside protection and potential return.
Advantages	Unlimited profit.	Limited Maximum Profit on the upside. Covered Combinations should only be traded on stocks that are bullish.