Compare Strategies
SHORT PUT BUTTERFLY | PROTECTIVE COLLAR | |
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About Strategy |
Short Put Butterfly Option StrategyIn 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:< |
Protective Collar Strategy This Strategy is implemented when the investor requires downside protection for the short - to medium term but at lower cost. Buying protective puts can be an expensive proposition and writing OTM calls can defray the cost of the puts quite substantially. Protective Collar is considered as bearish to neutral strategy. In this strategy risk and reward is both are limited. This .. |
SHORT PUT BUTTERFLY Vs PROTECTIVE COLLAR - Details
SHORT PUT BUTTERFLY | PROTECTIVE COLLAR | |
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Market View | Neutral | Neutral |
Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put Option) |
Number Of Positions | 4 | 2 |
Strategy Level | Advance | Beginners |
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 | Purchase Price of Underlying + Net Premium Paid |
SHORT PUT BUTTERFLY Vs PROTECTIVE COLLAR - When & How to use ?
SHORT PUT BUTTERFLY | PROTECTIVE COLLAR | |
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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 implemented when the investor requires downside protection for the short - to medium term but at lower cost. |
Action | Sell 1 ITM Put, Buy 2 ATM Put, Sell 1 OTM Put | • Short 1 Call Option, • Long 1 Put Option |
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 | Purchase Price of Underlying + Net Premium Paid |
SHORT PUT BUTTERFLY Vs PROTECTIVE COLLAR - Risk & Reward
SHORT PUT BUTTERFLY | PROTECTIVE COLLAR | |
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Maximum Profit Scenario | Net Premium Received - Commissions Paid | • Call strike - stock purchase price - net premium paid + net credit received |
Maximum Loss Scenario | Strike Price of Higher Strike Short Put - Strike Price of Long Put - Net Premium Received + Commissions Paid | • Stock purchase price - put strike - net premium paid - put strike + net credit received |
Risk | Limited | Limited |
Reward | Limited | Limited |
SHORT PUT BUTTERFLY Vs PROTECTIVE COLLAR - Strategy Pros & Cons
SHORT PUT BUTTERFLY | PROTECTIVE COLLAR | |
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Similar Strategies | Short Condor, Reverse Iron Condor | Bull Put Spread, Bull Call Spread |
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. | • Potential profit is lower or limited. |
Advantages | • Benefits from time decay. • Traders can earn more in a rising or range bound scenario. • Benefits from a surge in volatility. | The Risk is limited. |