Comparision (LONG STRADDLE
VS BULL CALENDER SPREAD )
Compare Strategies
LONG STRADDLE
BULL CALENDER SPREAD
About Strategy
Long Straddle Option Strategy
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
This strategy is implemented when a trader is bullish on the underlying stock/index in the short term say 2 months or so. A trader will write one Near Month OTM Call Option and buy one next Month OTM Call Option, thereby reducing the cost of purchase, with the same strike price of the same underlying asset. This strategy is used when a trader wants to make prof ..
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium
Stock Price when long call value is equal to net debit.
LONG STRADDLE Vs BULL CALENDER SPREAD - When & How to use ?
LONG STRADDLE
BULL CALENDER SPREAD
Market View
Neutral
Bullish
When to use?
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.
This strategy is used when a trader wants to make profit from a steady increase in the stock price over a short period of time.
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium
Stock Price when long call value is equal to net debit.
LONG STRADDLE Vs BULL CALENDER SPREAD - Risk & Reward
LONG STRADDLE
BULL CALENDER SPREAD
Maximum Profit Scenario
Max profit is achieved when at one option is exercised.
You have unlimited profit potential to the upside.
Maximum Loss Scenario
Maximum Loss = Net Premium Paid
Max Loss = Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Unlimited
Unlimited
LONG STRADDLE Vs BULL CALENDER SPREAD - Strategy Pros & Cons
LONG STRADDLE
BULL CALENDER SPREAD
Similar Strategies
Bear Put Spread
The Collar, Bull Put Spread
Disadvantage
• 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.
• Limited profit even if underlying asset rallies. • If the short call options are assigned when the underlying asset rallies then losses can be sustained.
Advantages
• Unlimited potential beyond the breakeven point in either direction . • Book your profit from highly volatile stocks without determining the direction. • Limited risk, more profit.
• Limited losses to the net debit. • Enable trader to book profit even if underlying asset stays stagnant. • If the market trends reverse, cashing in from stock price movement at limited risk.