COVERED COMBINATION	SHORT CALL BUTTERFLY
About Strategy	Covered Combination Option Strategy This 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 Read more..	Short Call Butterfly Option Strategy This strategy is opposite of the Long Call Butterfly Strategy, a trader expects the market to remain range bound in Long Call Butterfly, but here he expects the market to move beyond strike boundaries in Short Call Butterfly. If the trader is bullish on the market’s volatility, he will implement this strategy. Here also there should be equal distance between the .. Read more..

COVERED COMBINATION Vs SHORT CALL BUTTERFLY - Details

	COVERED COMBINATION	SHORT CALL BUTTERFLY
Market View	Bullish	Neutral
Type (CE/PE)	CE (Call Option) + PE (Put Option)	CE (Call Option)
Number Of Positions	2	4
Strategy Level	Advance	Advance
Reward Profile	Limited	Limited
Risk Profile	Unlimited	Limited
Breakeven Point	(Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2	Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium

COVERED COMBINATION Vs SHORT CALL BUTTERFLY - When & How to use ?

	COVERED COMBINATION	SHORT CALL BUTTERFLY
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 meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc.
Action	Sell 1 OTM Call, Sell 1 OTM Put	Buy 2 ATM Call, Sell 1 ITM Call, Sell 1 OTM Call
Breakeven Point	(Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2	Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium

COVERED COMBINATION Vs SHORT CALL BUTTERFLY - Risk & Reward

	COVERED COMBINATION	SHORT CALL BUTTERFLY
Maximum Profit Scenario	Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received - Commissions Paid	The profit is limited to the net premium received.
Maximum Loss Scenario	Purchase Price of Underlying + Strike Price of Short Put - (2 x Price of Underlying) - Max Profit + Commissions Paid	Higher strike price- Lower Strike Price - Net Premium
Risk	Unlimited	Limited
Reward	Limited	Limited

COVERED COMBINATION Vs SHORT CALL BUTTERFLY - Strategy Pros & Cons

	COVERED COMBINATION	SHORT CALL BUTTERFLY
Similar Strategies	Stock Repair Strategy	Long Straddle, Long Call Butterfly
Disadvantage	Combinations can be profitable in sideways or rising markets. Greater combined net credit increases downside protection and potential return.	• Limited rewards, usually offer smaller return. • Profitability depends on the significant movement of stocks and options prices.
Advantages	Limited Maximum Profit on the upside. Covered Combinations should only be traded on stocks that are bullish.	• Even if the market is highly volatile, the risk exposure remains limited. • Without any extra investment, you can receive your premium. • Able to book profits even when the price movement cannot be predicted.