Compare Strategies
COVERED COMBINATION | RATIO PUT WRITE | |
---|---|---|
![]() |
![]() |
|
About Strategy |
Covered Combination Option StrategyThis strategy involves selling OTM Call & Put Options and buying the underlying asset in either cash or futures market. It is also known as Covered Strangle as the profits are capped and risk is potentially unlimited. Risk: Un |
Ratio Put Write Option StrategyThis strategy is implemented by selling (short) the underlying asset in the cash/futures market. Simultaneously, sell ATM Puts double the number of long quantity. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited. .. |
COVERED COMBINATION Vs RATIO PUT WRITE - Details
COVERED COMBINATION | RATIO PUT WRITE | |
---|---|---|
Market View | Bullish | Neutral |
Type (CE/PE) | CE (Call Option) + PE (Put Option) | PE (Put Option) |
Number Of Positions | 2 | 2 |
Strategy Level | Advance | Beginners |
Reward Profile | Limited | Max Profit Achieved When Price of Underlying = Strike Price of Short Puts |
Risk Profile | Unlimited | Loss Occurs When Price of Underlying < Strike Price of Short Put - Net Premium Received OR Price of Underlying > Strike Price of Short Put + Net Premium Received |
Breakeven Point | (Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2 | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
COVERED COMBINATION Vs RATIO PUT WRITE - When & How to use ?
COVERED COMBINATION | RATIO PUT WRITE | |
---|---|---|
Market View | Bullish | Neutral |
When to use? | This strategy is mainly suited for investors who are moderately bullish on a stock and are comfortable with increasing their position in the event of a price decline. | This strategy is implemented by selling (short) the underlying asset in the cash/futures market. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future |
Action | Sell 1 OTM Call, Sell 1 OTM Put | Sell 2 ATM Puts |
Breakeven Point | (Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2 | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
COVERED COMBINATION Vs RATIO PUT WRITE - Risk & Reward
COVERED COMBINATION | RATIO PUT WRITE | |
---|---|---|
Maximum Profit Scenario | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received - Commissions Paid | Net Premium Received - Commissions Paid |
Maximum Loss Scenario | Purchase Price of Underlying + Strike Price of Short Put - (2 x Price of Underlying) - Max Profit + Commissions Paid | Price of Underlying - Sale Price of Underlying - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid |
Risk | Unlimited | Unlimited |
Reward | Limited | Limited |
COVERED COMBINATION Vs RATIO PUT WRITE - Strategy Pros & Cons
COVERED COMBINATION | RATIO PUT WRITE | |
---|---|---|
Similar Strategies | Stock Repair Strategy | Short Strangle and Short Straddle |
Disadvantage | Combinations can be profitable in sideways or rising markets. Greater combined net credit increases downside protection and potential return. | • Potential loss is higher than gain. • Limited profit. |
Advantages | Limited Maximum Profit on the upside. Covered Combinations should only be traded on stocks that are bullish. |