Bear Put Spread Vs Short Call Butterfly Options Trading Strategy Comparison

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

Bear Put Spread Vs Short Call Butterfly

	Bear Put Spread	Short Call Butterfly


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	Short Call Butterfly (or Short Butterfly) is a neutral strategy similar to Long Butterfly but bullish on the volatility. This strategy is a limited risk and limited profit strategy. This strategy consists of two long calls at a middle strike (or ATM) and one short call each at a lower and upper strike. All the options must have the same expiration date. Also, the upper and lower strikes (or wings) must both be equidistant from the middle strike (or body). In simple terms, it involves Sell 1 ITM Call, Buy 2 ATM Calls and Sell 1 OTM Call. The strike prices of all Options should be at equal distance from the current price as shown in the example below. The usual Short Butterfly strategy looks like as below for NIFTY current index value as 1... Read More
Market View	Bearish	Neutral
Strategy Level	Advance	Advance
Options Type	Put	Call
Number of Positions	2	4
Risk Profile	Limited	Limited
Reward Profile	Limited	Limited
Breakeven Point	Strike Price of Long Put - Net Premium	2 Break-even Points

When and how to use Bear Put Spread and Short Call Butterfly?

	Bear Put Spread	Short 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 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 about the direction in the movement in the price of the underlying but are expecting high volatility in it in the near future.
Action	Buy ITM Put Option Sell OTM Put Option	Buy 2 ATM Call Sell 1 ITM Call Sell 1 OTM Call
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.	2 Break-even Points There are 2 break even points in this strategy. Lower Break-even = Lower Strike Price + Net Premium Upper Break-even = Higher Strike Price - Net Premium

Compare Risks and Rewards (Bear Put Spread Vs Short Call Butterfly)

	Bear Put Spread	Short Call Butterfly
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 maximum risk is limited. Maximum Risk = Higher strike price- Lower Strike Price - Net Premium
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 profit is limited to the net premium received. This happens when the price of the underlying is trading beyond the range of strike prices at expiration date.
Maximum Profit Scenario	Underlying goes down and both options exercised	All Options exercised or not exercised
Maximum Loss Scenario	Underlying goes up and both options not exercised	Only ITM Call exercised

Pros & Cons or Bear Put Spread and Short Call Butterfly

	Bear Put Spread	Short Call Butterfly
Advantages	Risk is limited. It reduces the cost of investment.	This strategy requires no investment as net premium is positive and received. It allows you to benefit from high volatile market scenarios without the need to speculate on the direction of price movement.
Disadvantage	The profit is limited.	Profitability depends on significant movement in the price of the underlying.
Simillar Strategies	Bear Call Spread, Bull Call Spread	Long Straddle, Long Call Butterfly

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