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Bear Put Spread Vs Short Straddle (Sell Straddle or Naked Straddle) Options Trading Strategy Comparison

Compare Bear Put Spread and Short Straddle (Sell Straddle or Naked Straddle) options trading strategies. Find similarities and differences between Bear Put Spread and Short Straddle (Sell Straddle or Naked Straddle) strategies. Find the best options trading strategy for your trading needs.

Bear Put Spread Vs Short Straddle (Sell Straddle or Naked Straddle)

  Bear Put Spread Short Straddle (Sell Straddle or Naked Straddle)
Bear Put Spread Logo Short Straddle (Sell Straddle or Naked Straddle) 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 Short Straddle (or Sell Straddle or naked Straddle) is a neutral options strategy. This strategy involves simultaneously selling a call and a put option of the same underlying asset, same strike price and same expire date. A Short Straddle strategy is used in case of little volatility market scenarios wherein you expect none or very little movement in the price of the underlying. Such scenarios arise when there is no major news expected until expire. This is a limited profit and unlimited loss strategy. The maximum profit earned when, on expire date, the underlying asset is trading at the strike price at which the options are sold. The maximum loss is unlimited and occurs when underlying asset price moves sharply in upward or down... Read More
Market View Bearish Neutral
Strategy Level Advance Advance
Options Type Put Call + Put
Number of Positions 2 2
Risk Profile Limited Unlimited
Reward Profile Limited Limited
Breakeven Point Strike Price of Long Put - Net Premium 2 Breakeven Points

When and how to use Bear Put Spread and Short Straddle (Sell Straddle or Naked Straddle)?

  Bear Put Spread Short Straddle (Sell Straddle or Naked Straddle)
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 to be used when you expect a flat market in the coming days with very less movement in the prices of underlying asset.

Market View Bearish

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

Neutral

When trader don't expect much movement in its price in near future.

Action
  • Buy ITM Put Option
  • Sell OTM Put Option

  • Sell Call Option
  • Sell Put Option

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 Breakeven Points

There are 2 break even points in this strategy. The upper break even is hit when the underlying price is equal to the total of strike price of short call and net premium paid. The lower break even is hit when the underlying price is equal to the difference between strike price of short Put and net premium paid.

Break-even points:

Lower Breakeven = Strike Price of Put - Net Premium

Upper breakeven = Strike Price of Call+ Net Premium

Compare Risks and Rewards (Bear Put Spread Vs Short Straddle (Sell Straddle or Naked Straddle))

  Bear Put Spread Short Straddle (Sell Straddle or Naked Straddle)
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.

Unlimited

There is a possibility of unlimited loss in the short straddle strategy. The loss occurs when the price of the underlying significantly moves upwards and downwards.

Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received

Or

Loss= Strike Price of Short Put - Price of Underlying - Net Premium Received

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

Maximum profit is limited to the net premium received. The profit is achieved when the price of the underlying is equal to either strike price of short Call or Put.

Maximum Profit Scenario

Underlying goes down and both options exercised

Both Option not exercised

Maximum Loss Scenario

Underlying goes up and both options not exercised

One Option exercised

Pros & Cons or Bear Put Spread and Short Straddle (Sell Straddle or Naked Straddle)

  Bear Put Spread Short Straddle (Sell Straddle or Naked Straddle)
Advantages

Risk is limited. It reduces the cost of investment.

It allows you to benefit from double time decay and earn profit in a less volatile scenario.

Disadvantage

The profit is limited.

Unlimited losses if the price of the underlying move significantly in either direction.

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







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