Bear Call Spread option trading strategy is used by a trader who is bearish in nature and expects the underlying asset to dip in the near future. This strategy includes buying of an ‘Out of the Money’ Call Option and selling one ‘In the Money’ Call Option of the same underlying asset and the same expiration date. When you write a call, you receive premium thereby r
Straddle is neither bullish nor bearish strategy; it is a market neutral strategy. Here a trader wishes to take advantage of the volatility in the market. This strategy involves buying of one Call option and one Put option of the same strike price, same expiry date and of the same underlying asset. Now a trader is bound to make profits once stock moves in either direc ..
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium
BEAR CALL SPREAD Vs LONG STRADDLE - When & How to use ?
BEAR CALL SPREAD
LONG STRADDLE
Market View
Bearish
Neutral
When to use?
This 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 options strategy is work well when and investor market view is bearish. The strategy minimizes your risk in the event of prime movements going against your expectations.
Action
Buy OTM Call Option, Sell ITM Call Option
Buy Call Option, Buy Put Option
Breakeven Point
Strike Price of Short Call + Net Premium Received
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium
BEAR CALL SPREAD Vs LONG STRADDLE - Risk & Reward
BEAR CALL SPREAD
LONG STRADDLE
Maximum Profit Scenario
Max Profit = Net Premium Received - Commissions Paid
Max profit is achieved when at one option is exercised.
Maximum Loss Scenario
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Maximum Loss = Net Premium Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
BEAR CALL SPREAD Vs LONG STRADDLE - Strategy Pros & Cons
BEAR CALL SPREAD
LONG STRADDLE
Similar Strategies
Bear Put Spread, Bull Call Spread
Bear Put Spread
Disadvantage
• Limited amount of profit. • Margin requirement, more commission charges.
• There should be continuous movement of the stock and options price for this strategy to be profitable. • Time decay hurts long option if the strike price, expiration date or underlying stock are badly chosen.
Advantages
• This strategy takes advantage of time decay. • Investors can get profit in a flat market scenario. • Investors can earn options premium income with a lower degree of risk.
• Unlimited potential beyond the breakeven point in either direction . • Book your profit from highly volatile stocks without determining the direction. • Limited risk, more profit.