Bear Put Spread Vs Covered Strangle Options Trading Strategy Comparison

Compare Bear Put Spread and Covered Strangle options trading strategies. Find similarities and differences between Bear Put Spread and Covered Strangle strategies. Find the best options trading strategy for your trading needs.

Bear Put Spread Vs Covered Strangle

	Bear Put Spread	Covered Strangle


About Strategy	The Bear Put strategy involves selling a Put Option while simultaneously buying a Put option. Contrary to Bear Call Spread, here you pay the higher premium and receive the lower premium. So there is a net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums. 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 put debit spread as a net debit is taken upon entering the trade. This strategy has a limited risk as well as limited rewards. How to use the bear put spread options strategy? The bear put spread strategy looks like... Read More	The covered strangle option strategy is a bullish strategy. The strategy is created by owning or buying a stock and selling an OTM Call and OTM Put. It is called covered strangle because the upside risk of the strangle is covered or minimized. The strategy is perfect to use when you are prepared to sell the holding or bought shares at a higher price if the market moves up but would also is ready to buy more shares if the market moves downwards. The profit and in this strategy is unlimited while the risk is only on the downside.
Market View	Bearish	Bullish
Strategy Level	Advance	Advance
Options Type	Put	Call + Put + Underlying
Number of Positions	2	3
Risk Profile	Limited	Limited
Reward Profile	Limited	Limited
Breakeven Point	Strike Price of Long Put - Net Premium	two break-even points

When and how to use Bear Put Spread and Covered Strangle?

	Bear Put Spread	Covered Strangle
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.	A covered strangle strategy can be used when you are bullish on the market but also want to cover any downside risk. You are prepared to sell the shares on profit but are also willing to buy more shares in case the prices fall.
Market View	Bearish When you are expecting the price of the underlying to moderately drop.	Bullish The Strategy is perfect to apply when you're bullish on the market and expecting less volatility in the market.
Action	Buy ITM Put Option Sell OTM Put Option	Buy 100 shares + Sell OTM Call +Sell OTM Put The covered strangle options strategy can be executed by buying 100 shares of a stock while simultaneously selling an OTM Put and Call of the same the stock and similar expiration date.
Breakeven Point	Strike Price of Long Put - Net Premium The breakeven point is achieved when the price of the underlying is equal to strike price of long Put minus net premium.	two break-even points There are 2 break-even points in the covered strangle strategy. One is the Upper break even point which is the sum of strike price of the Call option and premium received while the other is the lower break-even point which is the difference strike price of short Put and premium received.

Compare Risks and Rewards (Bear Put Spread Vs Covered Strangle)

	Bear Put Spread	Covered Strangle
Risks	Limited The maximum loss is limited to net premium paid. It occurs when the price of the underlying is less than strike price of long Put.. Max Loss = Net Premium Paid.	Limited The risk on this strategy is only on the downside when the price moves below the strike price of the Put option.
Rewards	Limited The maximum profit is achieved when the strike price of short Put is greater than the price of the underlying.. Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid.	Limited The maximum profit on this strategy happens when the stock price is above the call price on expiry. The profit is the total of the gain from buying/selling stocks and net premium received on selling options.
Maximum Profit Scenario	Underlying goes down and both options exercised	You will earn the maximum profit when the price of the stock is above the Call option strike price on expiry. You will be assigned on the Call option, would be able to sell holding shares on profit while retaining the premiums received while selling the options.
Maximum Loss Scenario	Underlying goes up and both options not exercised	The maximum loss would be when the stock price falls drastically and turns worthless. The premiums received while selling the options will compensate for some of the loss.

Pros & Cons or Bear Put Spread and Covered Strangle

	Bear Put Spread	Covered Strangle
Advantages	Risk is limited. It reduces the cost of investment.	As the strategy involves buying shares when prices fall, there is long-term gain even if their short-term loss. There is no upside risk due to the long position in stocks. Allows you to earn income in a moderately bullish market.
Disadvantage	The profit is limited.	The substantial risk when the price moves downwards. Risk of assignments.
Simillar Strategies	Bear Call Spread, Bull Call Spread	Long Strangle, Short Strangle

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