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
This strategy is applied when trader goes long on the underlying asset i.e. he buys the stock in cash market. He has a bullish view and expects the market to rise in the near future, but simultaneously has the fear of downward movement of the markets. In order to cover his position from vulnerabilities he buys one ATM Put Option of the same underlying asset. Here, a trader wi ..
BEAR CALL SPREAD Vs MARRIED PUT - When & How to use ?
BEAR CALL SPREAD
MARRIED PUT
Market View
Bearish
Bullish
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 Strategy work when the investor goes long in any stock. He expects the rise in market in future.
Action
Buy OTM Call Option, Sell ITM Call Option
Buy 250 XYZ Shares, Buy 1 ATM Put Option
Breakeven Point
Strike Price of Short Call + Net Premium Received
Purchase Price of Underlying + Premium Paid
BEAR CALL SPREAD Vs MARRIED PUT - Risk & Reward
BEAR CALL SPREAD
MARRIED PUT
Maximum Profit Scenario
Max Profit = Net Premium Received - Commissions Paid
Profit = Price of Underlying - Purchase Price of Underlying - Premium Paid
Maximum Loss Scenario
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Max Loss = Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
BEAR CALL SPREAD Vs MARRIED PUT - Strategy Pros & Cons
BEAR CALL SPREAD
MARRIED PUT
Similar Strategies
Bear Put Spread, Bull Call Spread
Long Call
Disadvantage
• Limited amount of profit. • Margin requirement, more commission charges.
Cost of the put options eats into profit margin.
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.