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.<
Long Combo Option Trading Strategy is implemented when a trader is bullish in nature and expects the stock price to rise in the near future. Here a trader will sell one ‘Out of the Money’ Put Option and buy one ‘Out of the Money’ Call Option. This trade will require less capital to implement since the amount required to buy the call will be covered by the amount received ..
A long put option strategy works well when you're expecting the underlying asset to sharply decline or be volatile in near future.
This strategy is used when an investor Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it.
Action
Buy Put Option
Sell OTM Put Option, Buy OTM Call Option
Breakeven Point
Strike Price of Long Put - Premium Paid
Call Strike + Net Premium
LONG PUT Vs LONG COMBO - Risk & Reward
LONG PUT
LONG COMBO
Maximum Profit Scenario
Profit = Strike Price of Long Put - Premium Paid
Underlying asset goes up and Call option exercised
Maximum Loss Scenario
Max Loss = Premium Paid + Commissions Paid
Underlying asset goes down and Put option exercised
Risk
Limited
Unlimited
Reward
Unlimited
Unlimited
LONG PUT Vs LONG COMBO - Strategy Pros & Cons
LONG PUT
LONG COMBO
Similar Strategies
Protective Call, Short Put
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Disadvantage
• 100% loss if strike price, expiration dates or underlying stocks are badly chosen. • Time decay.
• Losses can keep on increasing as the price of stock goes down. • High risk strategy.
Advantages
• Limited risk to the premium paid. • Less capital investment and more profit. • Unlimited profit potential with limited risk.
• Capital investment is low and returns are high. • Unlimited reward, returns keep on increasing with the increase on stock price. • Leverage facility provided by this strategy is very beneficial.
