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Bull Call Spread Vs Bear Put Spread Options Trading Strategy Comparison

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

Bull Call Spread Vs Bear Put Spread

  Bull Call Spread Bear Put Spread
Bull Call Spread Logo Bear Put Spread Logo
About Strategy A Bull Call Spread (or Bull Call Debit Spread) strategy is meant for investors who are moderately bullish of the market and are expecting mild rise in the price of underlying. The strategy involves taking two positions of buying a Call Option and selling of a Call Option. The risk and reward in this strategy is limited. A Bull Call Spread strategy involves Buy ITM Call Option and Sell OTM Call Option.For example, if you are of the view that NIFTY will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell Nifty Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised. 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
Market View Bullish Bearish
Strategy Level Beginners Advance
Options Type Call Put
Number of Positions 2 2
Risk Profile Limited Limited
Reward Profile Limited Limited
Breakeven Point Strike price of purchased call + net premium paid Strike Price of Long Put - Net Premium

When and how to use Bull Call Spread and Bear Put Spread?

  Bull Call Spread Bear Put Spread
When to use?

A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future.

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.

Market View Bullish

When you are expecting a moderate rise in the price of the underlying.

Bearish

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

Action
  • Buy ITM Call Option
  • Sell OTM Call Option

A Bull Call Spread strategy involves Buy ITM Call Option + Sell OTM Call Option.

For example, if you are of the view that Nifty will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell NIFTY 50 Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised.

  • Buy ITM Put Option
  • Sell OTM Put Option

Breakeven Point Strike price of purchased call + net premium paid
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.

Compare Risks and Rewards (Bull Call Spread Vs Bear Put Spread)

  Bull Call Spread Bear Put Spread
Risks Limited

The trade will result in a loss if the price of the underlying decreases at expiration. The maximum loss is limited to net premium paid.

Max Loss = Net Premium Paid

Max Loss happens when the strike price of Call is less than or equal to price of the underlying.

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.

Rewards Limited

Limited To The Difference Between Two Strike Prices Minus Net Premium

Maximum profit happens when the price of the underlying rises above strike price of two Calls. The profit is limited to the difference between two strike prices minus net premium paid.

Max Profit = (Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid

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.

Maximum Profit Scenario

Both options exercised

Underlying goes down and both options exercised

Maximum Loss Scenario

Both options unexercised

Underlying goes up and both options not exercised

Pros & Cons or Bull Call Spread and Bear Put Spread

  Bull Call Spread Bear Put Spread
Advantages

Instead of straightaway buying a Call Option, this strategy allows you to reduce cost and risk of your investments.

Risk is limited. It reduces the cost of investment.

Disadvantage

Profit potential is limited.

The profit is limited.

Simillar Strategies Collar, Bull Put Spread Bear Call Spread, Bull Call Spread







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