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Bull Put Spread Vs Long Straddle (Buy Straddle) Options Trading Strategy Comparison

Compare Bull Put Spread and Long Straddle (Buy Straddle) options trading strategies. Find similarities and differences between Bull Put Spread and Long Straddle (Buy Straddle) strategies. Find the best options trading strategy for your trading needs.

Bull Put Spread Vs Long Straddle (Buy Straddle)

  Bull Put Spread Long Straddle (Buy Straddle)
Bull Put Spread Logo Long Straddle (Buy Straddle) Logo
About Strategy A Bull Put Spread (or Bull Put Credit Spread) strategy is a Bullish strategy to be used when you're expecting the price of the underlying instrument to mildly rise or be less volatile. The strategy involves buying a Put Option and selling a Put Option at different strike prices. The risk and reward for this strategy is limited. A Bull Put Strategy involves Buy OTM Put Option and Sell ITM Put Option. For example, If you are of the view that the price of Reliance Shares will moderately gain or drop its volatility in near future. If Reliance is currently trading at Rs 600 then you will buy an OTM Put Option at Rs 700 and a sell an ITM Put Option at Rs 550. You will make a profit when, at expiry, Reliance closes at Rs 700 level and incur losse... Read More The Long Straddle (or Buy Straddle) is a neutral strategy. This strategy involves simultaneously buying a call and a put option of the same underlying asset, same strike price and same expire date. A Long Straddle strategy is used in case of highly volatile market scenarios wherein you expect a big movement in the price of the underlying but are not sure of the direction. Such scenarios arise when company declare results, budget, war-like situation etc. This is an unlimited profit and limited risk strategy. The profit earns in this strategy is unlimited. Higher volatility results in higher profits. The maximum loss is limited to the net premium paid. The max loss occurs when underlying asset price on expire remains at the strike price. ... Read More
Market View Bullish Neutral
Strategy Level Advance Beginners
Options Type Put Call + Put
Number of Positions 2 2
Risk Profile Limited Limited
Reward Profile Limited Unlimited
Breakeven Point Strike price of short put - net premium paid 2 break-even points

When and how to use Bull Put Spread and Long Straddle (Buy Straddle)?

  Bull Put Spread Long Straddle (Buy Straddle)
When to use?

This strategy works well when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall.

The strategy is perfect to use when there is market volatility expected due to results, elections, budget, policy change, war etc.

Market View Bullish
When you are expecting a moderate rise in the price of the underlying or less volatility.
Neutral

When you are not sure on the direction the underlying would move but are expecting the rise in its volatility.

Action
  • Buy OTM Put Option
  • Sell ITM Put Option

A Bull Put Strategy involves Buy OTM Put Option + Sell ITM Put Option.

For example, If you are of the view that the price of Reliance Shares will moderately gain or drop its volatility in near future. If Reliance is currently trading at 600 then you will buy a OTM PUT OPTION at 700 and a sell a ITM PUT OPTION at 550. You will make a profit when at expiry Reliance closes at 700 level and incur losses if the prices fall down below the current price.

  • Buy Call Option
  • Buy Put Option

Breakeven Point Strike price of short put - net premium paid
2 break-even points

A straddle has two break-even points.

Lower Breakeven = Strike Price of Put - Net Premium

Upper breakeven = Strike Price of Call + Net Premium

Compare Risks and Rewards (Bull Put Spread Vs Long Straddle (Buy Straddle))

  Bull Put Spread Long Straddle (Buy Straddle)
Risks Limited

Maximum loss occurs when the stock price moves below the lower strike price on expiration date.

Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received

Max Loss Occurs When Price of Underlying <= Strike Price of Long Put

Limited

The maximum loss for long straddle strategy is limited to the net premium paid. It happens the price of underlying is equal to strike price of options.

Maximum Loss = Net Premium Paid

Rewards Limited

Maximum profit happens when the price of the underlying moves above the strike price of Short Put on expiration date.

Max Profit = Net Premium Received

Unlimited

There is unlimited profit opportunity in this strategy irrespective of the direction of the underlying. Profit occurs when the price of the underlying is greater than strike price of long Put or lesser than strike price of long Call.

Maximum Profit Scenario

Both options unexercised

Max profit is achieved when at one option is exercised.

Maximum Loss Scenario

Both options exercised

When both options are not exercised. This happens when underlying asset price on expire remains at the strike price.

Pros & Cons or Bull Put Spread and Long Straddle (Buy Straddle)

  Bull Put Spread Long Straddle (Buy Straddle)
Advantages

Allows you to benefit from time decay in profit situations. Helps you profit from 3 scenarios: rise, sideway movements and marginal fall of the underlying.

Earns you unlimited profit in a volatile market while minimizing the loss.

Disadvantage

Limited profit. Time decay may go against you in loss situations.

The price change has to be bigger to make good profits.

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







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