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

Comparision (SHORT CALL VS SHORT PUT)

 

Compare Strategies

  SHORT CALL SHORT PUT
About Strategy

Short Call Option Strategy

A trader shorts or writes a Call Option when he feels that underlying stock price is likely to go down. Selling Call Option is a strategy preferred for experienced traders.
However this strategy is very risky in nature. If the stock rallies on the upside, your risk becomes potentially unquantifiable and unlimited. If the 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.

SHORT CALL Vs SHORT PUT - Details

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

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

SHORT CALL SHORT PUT
Market View Bearish Bullish
When to use? It is an aggressive strategy and involves huge risks. It should be used only in case where trader is certain about the bearish market view on the underlying. This strategy works well when you're Bullish that the price of the underlying will not fall beyond a certain level.
Action Sell or Write Call Option Sell Put Option
Breakeven Point Strike Price of Short Call + Premium Received Strike Price - Premium

SHORT CALL Vs SHORT PUT - Risk & Reward

SHORT CALL SHORT PUT
Maximum Profit Scenario Max Profit = Premium Received Premium received in your account when you sell the Put Option.
Maximum Loss Scenario Loss Occurs When Price of Underlying > Strike Price of Short Call + Premium Received Unlimited (When the price of the underlying falls.)
Risk Unlimited Unlimited
Reward Limited Limited

SHORT CALL Vs SHORT PUT - Strategy Pros & Cons

SHORT CALL SHORT PUT
Similar Strategies Covered Put, Covered Calls Bull Put Spread, Short Starddle
Disadvantage • Unlimited risk to the upside underlying stocks. • Potential loss more than the premium collected. • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply.
Advantages • With the help of this strategy, traders can book profit from falling prices in the underlying asset. • Less investment, more profit. • Traders can book profit when underlying stock price fall, move sideways or rise by a small amount. • 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.

SHORT CALL

SHORT PUT