Compare Strategies
SYNTHETIC LONG CALL | REVERSE IRON BUTTERFLY | |
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About Strategy |
Synthetic Long Call Option StrategyA trader is bullish in nature for short term, but also fearful about the downside risk associated with it. Here, a trader wants to hold an underlying asset either in physical form like in case of commodities or demat (electronic) form in case of stocks. But he is always exposed to downside risk and in order to mitigate his losses, |
Reverse Iron Butterfly Option StrategyReverse Iron Butterfly as the name suggests is the opposite of Iron Butterfly. In Reverse Iron Butterfly, a trader is bullish on volatility and expects the market to make significant move in the near future in either directions. Here a trader will buy 1 ATM Call Option, sell 1 OTM Call Option, buy 1 ATM Put Option, sell 1 OTM Put Option. This strategy also bags lim .. |
SYNTHETIC LONG CALL Vs REVERSE IRON BUTTERFLY - Details
SYNTHETIC LONG CALL | REVERSE IRON BUTTERFLY | |
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Market View | Bullish | Neutral |
Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) |
Number Of Positions | 2 | 4 |
Strategy Level | Beginners | Advance |
Reward Profile | When Price of Underlying > Purchase Price of Underlying + Premium Paid | Limited |
Risk Profile | Limited (Maximum loss happens when the price of instrument move above from the strike price of put) | Limited |
Breakeven Point | Underlying Price + Put Premium | Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid |
SYNTHETIC LONG CALL Vs REVERSE IRON BUTTERFLY - When & How to use ?
SYNTHETIC LONG CALL | REVERSE IRON BUTTERFLY | |
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Market View | Bullish | Neutral |
When to use? | A trader is bullish in nature for short term, but also fearful about the downside risk associated with it. | This strategy is used when a trader is bullish on volatility and expects the market to make significant move in the near future in either directions. |
Action | Buy 1 ATM Put or OTM Put | Sell 1 OTM Put, Buy 1 ATM Put, Buy 1 ATM Call, Sell 1 OTM Call |
Breakeven Point | Underlying Price + Put Premium | Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid |
SYNTHETIC LONG CALL Vs REVERSE IRON BUTTERFLY - Risk & Reward
SYNTHETIC LONG CALL | REVERSE IRON BUTTERFLY | |
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Maximum Profit Scenario | Current Price - Purchase Price - Premium Paid | Strike Price of Short Call (or Long Put) - Strike Price of Long Call (or Short Put) - Net Premium Paid - Commissions Paid |
Maximum Loss Scenario | Premium Paid | Net Premium Paid + Commissions Paid |
Risk | Limited | Limited |
Reward | Unlimited | Limited |
SYNTHETIC LONG CALL Vs REVERSE IRON BUTTERFLY - Strategy Pros & Cons
SYNTHETIC LONG CALL | REVERSE IRON BUTTERFLY | |
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Similar Strategies | Protective Put, Long Call | Short Put Butterfly, Short Condor |
Disadvantage | •Chances of loss if the underlying goes down. •Incur losses if option is exercised. | • Potential loss is higher than gain, complex strategy. • Not suitable for beginners. |
Advantages | •Limited risk, unlimited profit. •Protection to your long-term holdings. • Limited loss to the to the premium paid for Put option. | • Able to profit whether stocks move in either direction up or down. • This strategy can be used by option traders who cannot use credit spreads. • Predictable maximum loss and profits, volatile strategy. |