Bear Call Spread option trading strategy is used by a trader who is bearish in nature and expects the underlying asset to dip in the near future. This strategy includes buying of an ‘Out of the Money’ Call Option and selling one ‘In the Money’ Call Option of the same underlying asset and the same expiration date. When you write a call, you receive premium thereby r
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 ..
BEAR CALL SPREAD Vs BULL PUT SPREAD - When & How to use ?
BEAR CALL SPREAD
BULL PUT SPREAD
Market View
Bearish
Bullish
When to use?
This strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.
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 OTM Call Option, Sell ITM Call Option
Buy OTM Put Option, Sell ITM Put Option
Breakeven Point
Strike Price of Short Call + Net Premium Received
Strike price of short put - net premium paid
BEAR CALL SPREAD Vs BULL PUT SPREAD - Risk & Reward
BEAR CALL SPREAD
BULL PUT SPREAD
Maximum Profit Scenario
Max Profit = Net Premium Received - Commissions Paid
Max Profit = Net Premium Received
Maximum Loss Scenario
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Risk
Limited
Limited
Reward
Limited
Limited
BEAR CALL SPREAD Vs BULL PUT SPREAD - Strategy Pros & Cons
BEAR CALL SPREAD
BULL PUT SPREAD
Similar Strategies
Bear Put Spread, Bull Call Spread
Bull Call Spread, Bear Put Spread, Collar
Disadvantage
• Limited amount of profit. • Margin requirement, more commission charges.
• Limited profit potential. • In loss situations, time decay may go against you.
Advantages
• This strategy takes advantage of time decay. • Investors can get profit in a flat market scenario. • Investors can earn options premium income with a lower degree of risk.
• 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.