Zerodha (Trading & Demat Account)
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Zerodha (Trading & Demat Account)
FREE Equity Delivery and MF
Flat ₹20/trade Intra-day/F&O
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Compare Collar and Bull Call Spread options trading strategies. Find similarities and differences between Collar and Bull Call Spread strategies. Find the best options trading strategy for your trading needs.
| Collar | Bull Call Spread | |
|---|---|---|
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| About Strategy | A Collar is similar to Covered Call but involves another position of buying a Put Option to cover the fall in the price of the underlying. It involves buying an ATM Put Option & selling an OTM Call Option of the underlying asset. It is a low risk strategy since the Put Option minimizes the downside risk. However, the rewards are also limited and is perfect for conservatively Bullish market view. Suppose you are holding shares of SBI currently trading at Rs 250. You can deploy a collar strategy by selling a Call Option of strike price Rs 300 while at the same time purchasing a Rs 200 strike price Put option. If the price rises to Rs 300, your benefit from increase in value of your holdings and you will lose net premiums. If the price falls... Read More | 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. |
| Market View | Bullish | Bullish |
| Strategy Level | Advance | Beginners |
| Options Type | Call + Put + Underlying | Call |
| Number of Positions | 3 | 2 |
| Risk Profile | Limited | Limited |
| Reward Profile | Limited | Limited |
| Breakeven Point | Price of Features - Call Premium + Put Premium | Strike price of purchased call + net premium paid |
| Collar | Bull Call Spread | |
|---|---|---|
| When to use? | The Collar strategy is perfect if you're Bullish for the underlying you're holding but are concerned with risk and want to protect your losses. |
A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future. |
| Market View | Bullish When you are of the view that the price of the underlying will move up but also want to protect the downside. |
Bullish When you are expecting a moderate rise in the price of the underlying. |
| Action |
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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. |
| Breakeven Point | Price of Features - Call Premium + Put Premium |
Strike price of purchased call + net premium paid |
| Collar | Bull Call Spread | |
|---|---|---|
| Risks | Limited You will incur maximum losses when price of the underlying is less than the strike price of the Put Option. Max Loss = Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received |
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. |
| Rewards | Limited You will incur maximum profit when price of underlying is greater than the strike price of call option. Max Profit = Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received |
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 |
| Maximum Profit Scenario | Underlying goes up and Call option exercised |
Both options exercised |
| Maximum Loss Scenario | Underlying goes down and Put option exercised |
Both options unexercised |
| Collar | Bull Call Spread | |
|---|---|---|
| Advantages | It protects the losses on underlying asset. |
Instead of straightaway buying a Call Option, this strategy allows you to reduce cost and risk of your investments. |
| Disadvantage | The profit is limited |
Profit potential is limited. |
| Simillar Strategies | Covered Put Bull, Call Spread, Bull Put Spread | Collar, Bull Put Spread |
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