This strategy is implemented by buying 1 Put Option i.e. a single position, when the person is bearish on the market and expects the market to move downwards in the near future.
Risk: The maximum loss will be the premium amount paid.<
This strategy is implemented when a trader is bullish on the underlying stock/index in the short term say 2 months or so. A trader will write one Near Month OTM Call Option and buy one next Month OTM Call Option, thereby reducing the cost of purchase, with the same strike price of the same underlying asset. This strategy is used when a trader wants to make prof ..
Stock Price when long call value is equal to net debit.
LONG PUT Vs BULL CALENDER SPREAD - Risk & Reward
LONG PUT
BULL CALENDER SPREAD
Maximum Profit Scenario
Profit = Strike Price of Long Put - Premium Paid
You have unlimited profit potential to the upside.
Maximum Loss Scenario
Max Loss = Premium Paid + Commissions Paid
Max Loss = Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Unlimited
Unlimited
LONG PUT Vs BULL CALENDER SPREAD - Strategy Pros & Cons
LONG PUT
BULL CALENDER SPREAD
Similar Strategies
Protective Call, Short Put
The Collar, Bull Put Spread
Disadvantage
• 100% loss if strike price, expiration dates or underlying stocks are badly chosen. • Time decay.
• Limited profit even if underlying asset rallies. • If the short call options are assigned when the underlying asset rallies then losses can be sustained.
Advantages
• Limited risk to the premium paid. • Less capital investment and more profit. • Unlimited profit potential with limited risk.
• Limited losses to the net debit. • Enable trader to book profit even if underlying asset stays stagnant. • If the market trends reverse, cashing in from stock price movement at limited risk.