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Comparision (SHORT PUT VS LONG CALL)

 

Compare Strategies

  SHORT PUT LONG CALL
About Strategy

Short Put Option Strategy

A trader will short put if he is bullish in nature and expects the underlying asset not to fall below a certain level.
Risk: Losses will be potentially unlimited if the stock skyrockets above the strike price of put.

Long Call Option Strategy

This is one of the basic strategies as it involves entering into one position i.e. buying the Call Option only. Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.

SHORT PUT Vs LONG CALL - Details

SHORT PUT LONG CALL
Market View Bullish Bullish
Type (CE/PE) PE (Put Option) CE (Call Option)
Number Of Positions 1 1
Strategy Level Beginners Beginner Level
Reward Profile Limited Unlimited
Risk Profile Unlimited Limited
Breakeven Point Strike Price - Premium Strike Price + Premium

SHORT PUT Vs LONG CALL - When & How to use ?

SHORT PUT LONG CALL
Market View Bullish Bullish (Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.)
When to use? This strategy works well when you're Bullish that the price of the underlying will not fall beyond a certain level. This strategy work when an investor expect the underlying instrument move in upward direction.
Action Sell Put Option Buying Call option
Breakeven Point Strike Price - Premium Strike price + Premium

SHORT PUT Vs LONG CALL - Risk & Reward

SHORT PUT LONG CALL
Maximum Profit Scenario Premium received in your account when you sell the Put Option. Underlying Asset close above from the strike price on expiry.
Maximum Loss Scenario Unlimited (When the price of the underlying falls.) Premium Paid
Risk Unlimited Limited
Reward Limited Unlimited

SHORT PUT Vs LONG CALL - Strategy Pros & Cons

SHORT PUT LONG CALL
Similar Strategies Bull Put Spread, Short Starddle Protective Put
Disadvantage • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply. • In this strategy, there is not protection against the underlying stock falling in value. • 100% loss if the strike price, expiration dates or underlying stocks are badly chosen.
Advantages • Benefit from time decay. • Less capital required than buying the stock outright. • Profit when underlying stock price rise, move sideways or drop by a relatively small account. • Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock.

SHORT PUT

LONG CALL