Compare Strategies:

Bear Call Spread Vs Long Call Butterfly Options Trading Strategy Comparison

Compare Bear Call Spread and Long Call Butterfly options trading strategies. Find similarities and differences between Bear Call Spread and Long Call Butterfly strategies. Find the best options trading strategy for your trading needs.

Bear Call Spread Vs Long Call Butterfly

  Bear Call Spread Long Call Butterfly
Bear Call Spread Logo Long Call Butterfly Logo
About Strategy A Bear Call Spread strategy involves buying a Call Option while simultaneously selling a Call Option of lower strike price on same underlying asset and expiry date. You receive a premium for selling a Call Option and pay a premium for buying a Call Option. So your cost of investment is much lower. The strategy is less risky with the reward limited to the difference in premium received and paid. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear call credit spread as a net credit is received upon entering the trade. The risk and reward both are limited in the strategy. How to use the bear call spread options strategy? The bear call spr... Read More Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price. Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls.... Read More
Market View Bearish Neutral
Strategy Level Beginners Advance
Options Type Call Call
Number of Positions 2 4
Risk Profile Limited Limited
Reward Profile Limited Limited
Breakeven Point Strike Price of Short Call + Net Premium Received

When and how to use Bear Call Spread and Long Call Butterfly?

  Bear Call Spread Long Call Butterfly
When to use?

The bear call spread options 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 should be used when you're expecting no volatility in the price of the underlying.

Market View Bearish

When you are expecting the price of the underlying to moderately go down.

Neutral

Neutral on the underlying asset and bearish on the volatility.

Action
  • Buy OTM Call Option
  • Sell ITM Call Option

Let's assume you're Bearish on Nifty and are expecting mild drop in the price. You can deploy Bear Call strategy by selling a Call Option with lower strike and buying a Call Option with higher strike. You will receive a higher premium for selling a Call while pay lower premium for buying a Call. The net premium will be your profit. If the price of Nifty rises, your loss will be limited to difference between two strike prices minus net premium.

  • Sell 2 ATM Call
  • Buy 1 ITM Call
  • Buy 1 OTM Call

Breakeven Point Strike Price of Short Call + Net Premium Received

The break even point is achieved when the price of the underlying is equal to strike price of the short Call plus net premium received.


Upper Breakeven = Higher Strike Price - Net Premium

Lower Breakeven = Lower Strike Price + Net Premium

Compare Risks and Rewards (Bear Call Spread Vs Long Call Butterfly)

  Bear Call Spread Long Call Butterfly
Risks Limited

The maximum loss occurs when the price of the underlying moves above the strike price of long Call.

Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received

Limited

Risk in the Long Call Butterfly options strategy is limited to the net premium paid.

Rewards Limited

The maximum profit the net premium received. It occurs when the price of the underlying is greater than strike price of short Call Option.

Max Profit = Net Premium Received - Commissions Paid

Limited

Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit.

Maximum Profit Scenario

Underlying goes down and both options not exercised

Only ITM Call exercised

Maximum Loss Scenario

Underlying goes up and both options exercised

All options exercised or all options not exercised.

Pros & Cons or Bear Call Spread and Long Call Butterfly

  Bear Call Spread Long Call Butterfly
Advantages

It allows you to profit in a flat market scenario when you're expecting the underlying to mildly drop, be range bound or marginally rise.

Profit earning strategy with limited risk in a less volatile market.

Disadvantage

Limited profit potential.

Premiums and brokerage paid on multiple position may eat your profits.

Simillar Strategies Bear Put Spread, Bull Call Spread
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Long Call Butterfly Vs Long Call
Long Call Butterfly Vs Short Call
Long Call Butterfly Vs Long Put
Long Call Butterfly Vs Short Put
Long Call Butterfly Vs Bull Call Spread
Long Call Butterfly Vs Bull Put Spread
Long Call Butterfly Vs Synthetic Call
Long Call Butterfly Vs Covered Call
Long Call Butterfly Vs Long Combo
Long Call Butterfly Vs Collar
Long Call Butterfly Vs Bear Put Spread
Long Call Butterfly Vs Protective Call
Long Call Butterfly Vs Covered Put
Long Call Butterfly Vs Long Straddle
Long Call Butterfly Vs Short Straddle
Long Call Butterfly Vs Long Strangle
Long Call Butterfly Vs Short Strangle
Long Call Butterfly Vs Short Call Butterfly
Long Call Butterfly Vs Long Condor
Long Call Butterfly Vs Short Condor
Long Call Butterfly Vs Box Spread
Long Call Butterfly Vs Short Box
Long Call Butterfly Vs Covered Strangle







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