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Bear Put Spread Vs Long Strangle (Buy Strangle) Options Trading Strategy Comparison

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

Bear Put Spread Vs Long Strangle (Buy Strangle)

  Bear Put Spread Long Strangle (Buy Strangle)
Bear Put Spread Logo Long Strangle (Buy Strangle) Logo
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 Long Strangle (or Buy Strangle or Option Strangle) is a neutral strategy wherein Slightly OTM Put Options and Slightly OTM Call are bought simultaneously with same underlying asset and expiry date. This strategy can be used when the trader expects that the underlying stock will experience significant volatility in the near term. It is a limited risk and unlimited reward strategy. The maximum loss is the net premium paid while maximum profit is achieved when the underlying moves either significantly upwards or downwards at expiration. The usual Long Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY Spot Price): Options Strangle Orders OrdersNIFTY Strike Price Buy 1 Slightly OTM PutN... Read More
Market View Bearish Neutral
Strategy Level Advance Beginners
Options Type Put Call + Put
Number of Positions 2 2
Risk Profile Limited Limited
Reward Profile Limited Unlimited
Breakeven Point Strike Price of Long Put - Net Premium two break-even points

When and how to use Bear Put Spread and Long Strangle (Buy Strangle)?

  Bear Put Spread Long Strangle (Buy 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 Long Strangle is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc.

Market View Bearish

When you are expecting the price of the underlying to moderately drop.

Neutral

When you are unsure of the direction of the underlying but expecting high volatility in it.

Action
  • Buy ITM Put Option
  • Sell OTM Put Option

  • Buy OTM Call Option
  • Buy OTM Put Option

Suppose Nifty is currently at 10400 and you expect the price to move sharply but are unsure about the direction. In such a scenario, you can execute long strangle strategy by buying Nifty at 10600 and at 10800. The net premium paid will be your maximum loss while the profit will depend on how high or low the index moves.

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

A Options Strangle strategy has two break-even points.

Lower Breakeven Point = Strike Price of Put - Net Premium

Upper Breakeven Point = Strike Price of Call + Net Premium

Compare Risks and Rewards (Bear Put Spread Vs Long Strangle (Buy Strangle))

  Bear Put Spread Long Strangle (Buy 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

Max Loss = Net Premium Paid

The maximum loss is limited to the net premium paid in the long strangle strategy. It occurs when the price of the underlying is trading between the strike price of Options.

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.

Unlimited

Maximum profit is achieved when the underlying moves significantly up and down at expiration.

Profit = Price of Underlying - Strike Price of Long Call - Net Premium Paid

Or

Profit = Strike Price of Long Put - Price of Underlying - Net Premium Paid

Maximum Profit Scenario

Underlying goes down and both options exercised

One Option exercised

Maximum Loss Scenario

Underlying goes up and both options not exercised

Both Option not exercised

Pros & Cons or Bear Put Spread and Long Strangle (Buy Strangle)

  Bear Put Spread Long Strangle (Buy Strangle)
Advantages

Risk is limited. It reduces the cost of investment.

Disadvantage

The profit is limited.

The strategy requires significant price movements in the underlying to gain profits.

Simillar Strategies Bear Call Spread, Bull Call Spread Long Straddle, Short Strangle