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Comparision (BEAR PUT SPREAD VS LONG CALL)

 

Compare Strategies

  BEAR PUT SPREAD LONG CALL
About Strategy

Bear Put Spread Option Strategy 

When a trader is moderately bearish on the market he can implement this strategy. Bear-Put-Spread involves buying of ITM Put Option and selling of an OTM Put Option. If prices fall, the ITM Put option starts making profits and the OTM Put option also adds to profit at a certain extent if the expiry price stays above the OTM strike. However, if it falls below the OTM

Long Call Option Strategy

This is one of the basic strategies as it involves entering into one position i.e. buying the Call Option only. Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.

BEAR PUT SPREAD Vs LONG CALL - Details

BEAR PUT SPREAD LONG CALL
Market View Bearish Bullish
Type (CE/PE) PE (Put Option) CE (Call Option)
Number Of Positions 2 1
Strategy Level Advance Beginner Level
Reward Profile Limited Unlimited
Risk Profile Limited Limited
Breakeven Point Strike Price of Long Put - Net Premium Strike Price + Premium

BEAR PUT SPREAD Vs LONG CALL - When & How to use ?

BEAR PUT SPREAD LONG CALL
Market View Bearish Bullish (Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.)
When to use? The bear call spread options 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. This strategy work when an investor expect the underlying instrument move in upward direction.
Action Buy ITM Put Option, Sell OTM Put Option Buying Call option
Breakeven Point Strike Price of Long Put - Net Premium Strike price + Premium

BEAR PUT SPREAD Vs LONG CALL - Risk & Reward

BEAR PUT SPREAD LONG CALL
Maximum Profit Scenario Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid. Underlying Asset close above from the strike price on expiry.
Maximum Loss Scenario Max Loss = Net Premium Paid. Premium Paid
Risk Limited Limited
Reward Limited Unlimited

BEAR PUT SPREAD Vs LONG CALL - Strategy Pros & Cons

BEAR PUT SPREAD LONG CALL
Similar Strategies Bear Call Spread, Bull Call Spread Protective Put
Disadvantage • Limited profit. • Early assignment risk. • In this strategy, there is not protection against the underlying stock falling in value. • 100% loss if the strike price, expiration dates or underlying stocks are badly chosen.
Advantages • If the strike price, expiration date or underlying stocks are rightly chosen then risk of losses would be limited to the net premium paid. • This strategy works well in declining markets. • Limited risk. • Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock.

BEAR PUT SPREAD

LONG CALL