Compare Strategies
LONG PUT BUTTERFLY | BULL PUT SPREAD | |
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About Strategy |
Long Put Butterfly Option StrategyThe Long Put Butterfly is a neutral strategy where a trader will be bearish on the volatility i.e. he thinks the market will have sideways kind of movement and will not rally sharply in either direction in the near future. This strategy involves sale of 2 ATM Put Options, buy 1 ITM and 1 OTM Put Option. The risk and reward are limited. |
Bull Put Spread Option StrategyBull 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 .. |
LONG PUT BUTTERFLY Vs BULL PUT SPREAD - Details
LONG PUT BUTTERFLY | BULL PUT SPREAD | |
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Market View | Neutral | Bullish |
Type (CE/PE) | PE (Put Option) | PE (Put Option) |
Number Of Positions | 4 | 2 |
Strategy Level | Advance | Advance |
Reward Profile | Limited | Limited |
Risk Profile | Limited | Limited |
Breakeven Point | Upper Breakeven Point = Strike Price of Highest Strike Long Put - Net Premium Paid, Lower Breakeven Point = Strike Price of Lowest Strike Long Put + Net Premium Paid | Strike price of short put - net premium paid |
LONG PUT BUTTERFLY Vs BULL PUT SPREAD - When & How to use ?
LONG PUT BUTTERFLY | BULL PUT SPREAD | |
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Market View | Neutral | Bullish |
When to use? | The Long Put Butterfly is a neutral strategy where a trader will be bearish on the volatility i.e. he thinks the market will have sideways kind of movement and will not rally sharply in either direction in the near future. | 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. |
Action | Buy 1 OTM Put, Sell 2 ATM Puts, Buy 1 ITM Put | Buy OTM Put Option, Sell ITM Put Option |
Breakeven Point | Upper Breakeven Point = Strike Price of Highest Strike Long Put - Net Premium Paid, Lower Breakeven Point = Strike Price of Lowest Strike Long Put + Net Premium Paid | Strike price of short put - net premium paid |
LONG PUT BUTTERFLY Vs BULL PUT SPREAD - Risk & Reward
LONG PUT BUTTERFLY | BULL PUT SPREAD | |
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Maximum Profit Scenario | Strike Price of Higher Strike Long Put - Strike Price of Short Put - Net Premium Paid - Commissions Paid | Max Profit = Net Premium Received |
Maximum Loss Scenario | When Price of Underlying <= Strike Price of Lower Strike Long Put OR Price of Underlying >= Strike Price of Higher Strike Long Put | Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received |
Risk | Limited | Limited |
Reward | Limited | Limited |
LONG PUT BUTTERFLY Vs BULL PUT SPREAD - Strategy Pros & Cons
LONG PUT BUTTERFLY | BULL PUT SPREAD | |
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Similar Strategies | Iron Condors, Iron Butterfly | Bull Call Spread, Bear Put Spread, Collar |
Disadvantage | • Risk is higher than reward. • When the underlying price is in between the two breakeven points, time decay hurts the position. | • Limited profit potential. • In loss situations, time decay may go against you. |
Advantages | • Limited maximum loss. • Unlimited profit potential, risk only limited to loss of premium. • Benefits from low volatility. | • 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. |