STOCK BROKER REVIEW | INVESTING | UPCOMING IPO | ALGO TRADING | TECHNICAL ANALYSIS

Comparision (CALL BACKSPREAD VS LONG CALL BUTTERFLY)

 

Compare Strategies

  CALL BACKSPREAD LONG CALL BUTTERFLY
About Strategy

Call Backspread Option Trading 

This strategy is adopted by traders who are bullish in nature. He expects market and volatility to rise in the near future. A trader need not be direction specific here (i.e. an upward or downward trend, but a small bias towards an uptrend should always be present, as the gains will be much higher once the market moves up r

Long Call Butterfly Option Strategy

A trader, who is neutral in nature and believes that there will be very low volatility i.e. expects the market to remain range bound, will implement this strategy. This strategy involves selling of 2 ATM Call Options, buying 1 ITM Call Option & buying 1 OTM Call Option of the same expiry date & same underlying asset. The difference between the strikes sho ..

CALL BACKSPREAD Vs LONG CALL BUTTERFLY - Details

CALL BACKSPREAD LONG CALL BUTTERFLY
Market View Bullish Neutral
Type (CE/PE) CE (Call Option) CE (Call Option)
Number Of Positions 3 4
Strategy Level Advance Advance
Reward Profile Unlimited Limited
Risk Profile Limited Limited
Breakeven Point Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss Upper Breakeven = Higher Strike Price - Net Premium, Lower Breakeven = Lower Strike Price + Net Premium

CALL BACKSPREAD Vs LONG CALL BUTTERFLY - When & How to use ?

CALL BACKSPREAD LONG CALL BUTTERFLY
Market View Bullish Neutral
When to use? This strategy is used when the investor expects the price of the stock to rise in the future. This strategy should be used when you're expecting no volatility in the price of the underlying.
Action Sell 1 ITM Call, BUY 2 OTM Call Sell 2 ATM Call, Buy 1 ITM Call, Buy 1 OTM Call
Breakeven Point Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss Upper Breakeven = Higher Strike Price - Net Premium, Lower Breakeven = Lower Strike Price + Net Premium

CALL BACKSPREAD Vs LONG CALL BUTTERFLY - Risk & Reward

CALL BACKSPREAD LONG CALL BUTTERFLY
Maximum Profit Scenario Unlimited profit potential if the stock goes in upward direction. Adjacent strikes - Net premium debit.
Maximum Loss Scenario Strike Price of long call - Strike Price of short call - Net premium received Net Premium Paid
Risk Limited Limited
Reward Unlimited Limited

CALL BACKSPREAD Vs LONG CALL BUTTERFLY - Strategy Pros & Cons

CALL BACKSPREAD LONG CALL BUTTERFLY
Similar Strategies - -
Disadvantage • Due to limited lifespan of call options, you can lose the premium paid. • Limited profit which is bound in a narrow range between the two wing strikes.
Advantages • Unlimited profit potential. • Under this strategy, a trader can book profit even when there is not volatility in the market. • Limited risks to the net premium paid. • This strategy allows you to gain more profits by investing less and limiting your losses to minimum.

CALL BACKSPREAD

LONG CALL BUTTERFLY