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Bull Call Spread Vs Long Call Butterfly Options Trading Strategy Comparison

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

Bull Call Spread Vs Long Call Butterfly

  Bull Call Spread Long Call Butterfly
Bull Call Spread Logo Long Call Butterfly 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. Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price. Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls.... Read More
Market View Bullish Neutral
Strategy Level Beginners Advance
Options Type Call Call
Number of Positions 2 4
Risk Profile Limited Limited
Reward Profile Limited Limited
Breakeven Point Strike price of purchased call + net premium paid

When and how to use Bull Call Spread and Long Call Butterfly?

  Bull Call Spread Long Call Butterfly
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.

This strategy should be used when you're expecting no volatility in the price of the underlying.

Market View Bullish

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

Neutral

Neutral on the underlying asset and bearish on the volatility.

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 2 ATM Call
  • Buy 1 ITM Call
  • Buy 1 OTM Call

Breakeven Point Strike price of purchased call + net premium paid

Upper Breakeven = Higher Strike Price - Net Premium

Lower Breakeven = Lower Strike Price + Net Premium

Compare Risks and Rewards (Bull Call Spread Vs Long Call Butterfly)

  Bull Call Spread Long Call Butterfly
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

Risk in the Long Call Butterfly options strategy is limited to the 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

Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit.

Maximum Profit Scenario

Both options exercised

Only ITM Call exercised

Maximum Loss Scenario

Both options unexercised

All options exercised or all options not exercised.

Pros & Cons or Bull Call Spread and Long Call Butterfly

  Bull Call Spread Long Call Butterfly
Advantages

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

Profit earning strategy with limited risk in a less volatile market.

Disadvantage

Profit potential is limited.

Premiums and brokerage paid on multiple position may eat your profits.

Simillar Strategies Collar, Bull Put Spread
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