Chittorgarh.com Logo
Loading...
Compare Strategies:

Bull Call Spread Vs Covered Put (Married Put) Options Trading Strategy Comparison

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

Bull Call Spread Vs Covered Put (Married Put)

  Bull Call Spread Covered Put (Married Put)
Bull Call Spread Logo Covered Put (Married Put) 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 Covered Put is a neutral to bearish market view and expects the price of the underlying to remain range bound or go down. In this strategy, while shorting shares (or futures), you also sell a Put Option (ATM or slight OTM) to cover for any unexpected rise in the price of the shares. This strategy is also known as Married Put strategy or writing covered put strategy. The risk is unlimited while the reward is limited in this strategy. How to use a Protective Call trading strategy? The usual Covered Put looks like as below for State Bank of India (SBI) Shares which are currently traded at Rs 275 (SBI Spot Price): Covered Put Orders - SBI Stock OrdersSBI Strike Price Sell Underlying SharesSell 100 SBI Shares ... Read More
Market View Bullish Bearish
Strategy Level Beginners Advance
Options Type Call Put + Underlying
Number of Positions 2 2
Risk Profile Limited Unlimited
Reward Profile Limited Limited
Breakeven Point Strike price of purchased call + net premium paid Futures Price + Premium Received

When and how to use Bull Call Spread and Covered Put (Married Put)?

  Bull Call Spread Covered Put (Married Put)
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 Covered Put works well when the market is moderately Bearish

Market View Bullish

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

Bearish

When you are expecting a moderate drop in the price and volatility of the underlying.

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.

Sell Underlying Sell OTM Put Option

Suppose SBI is trading at 300. You believe that the price will remain range bound or mildly drop. The covered put allows you to benefit from this market view. In this strategy, you sell the underlying and also sell a Put Option of the underlying and receive the premium. You will benefit from drop in prices of SBI, the Put Option will minimize your risks. If there is no change in price then you keep the premium received as profit.

Breakeven Point Strike price of purchased call + net premium paid
Futures Price + Premium Received

The break-even point is achieved when the price of the underlying is equal to the total of the sale price of underlying and premium received.

Compare Risks and Rewards (Bull Call Spread Vs Covered Put (Married Put))

  Bull Call Spread Covered Put (Married Put)
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.

Unlimited

The Maximum Loss is Unlimited as the price of the underlying can theoretically go up to any extent.

Loss = Price of Underlying - Sale Price of Underlying - Premium Received

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 limited to the premiums received. The profit happens when the price of the underlying moves above strike price of Short Put.

Maximum Profit Scenario

Both options exercised

Underlying goes down and Options exercised

Maximum Loss Scenario

Both options unexercised

Underlying goes up and Options exercised

Pros & Cons or Bull Call Spread and Covered Put (Married Put)

  Bull Call Spread Covered Put (Married Put)
Advantages

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

Its an income generation strategy in a neutral or Bearish market. Also allows you to benefit from fall in prices, range bound movements or mild increase.

Disadvantage

Profit potential is limited.

The risks can be huge if the prices increases steeply.

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