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Comparision (SHORT PUT BUTTERFLY VS SHORT CALL BUTTERFLY)

 

Compare Strategies

  SHORT PUT BUTTERFLY SHORT CALL BUTTERFLY
About Strategy

Short Put Butterfly Option Strategy 

In Short Put Butterfly strategy, a trader is neutral in nature and expects the market to remain range bound in the near future. A trader will buy 2 ATM Put Options; sell 1 ITM & 1 OTM Put Options. Here risk and returns both are limited.
Risk:<

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 ..

SHORT PUT BUTTERFLY Vs SHORT CALL BUTTERFLY - Details

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

SHORT PUT BUTTERFLY Vs SHORT CALL BUTTERFLY - When & How to use ?

SHORT PUT BUTTERFLY SHORT CALL BUTTERFLY
Market View Neutral Neutral
When to use? In Short Put Butterfly strategy, a trader is neutral in nature and expects the market to remain range bound in the near future. 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 ITM Put, Buy 2 ATM Put, Sell 1 OTM Put Buy 2 ATM Call, Sell 1 ITM Call, Sell 1 OTM Call
Breakeven Point Upper Breakeven Point = Strike Price of Highest Strike Short Put - Net Premium Received, Lower Breakeven Point = Strike Price of Lowest Strike Short Put + Net Premium Received Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium

SHORT PUT BUTTERFLY Vs SHORT CALL BUTTERFLY - Risk & Reward

SHORT PUT BUTTERFLY SHORT CALL BUTTERFLY
Maximum Profit Scenario Net Premium Received - Commissions Paid The profit is limited to the net premium received.
Maximum Loss Scenario Strike Price of Higher Strike Short Put - Strike Price of Long Put - Net Premium Received + Commissions Paid Higher strike price- Lower Strike Price - Net Premium
Risk Limited Limited
Reward Limited Limited

SHORT PUT BUTTERFLY Vs SHORT CALL BUTTERFLY - Strategy Pros & Cons

SHORT PUT BUTTERFLY SHORT CALL BUTTERFLY
Similar Strategies Short Condor, Reverse Iron Condor Long Straddle, Long Call Butterfly
Disadvantage • High risk strategy and may cause huge losses if the price of the underlying stocks falls steeply. • Higher profit is only possible when shares get close to expiration. • Limited rewards, usually offer smaller return. • Profitability depends on the significant movement of stocks and options prices.
Advantages • Benefits from time decay. • Traders can earn more in a rising or range bound scenario. • Benefits from a surge in volatility. • 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.

SHORT PUT BUTTERFLY

SHORT CALL BUTTERFLY