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Covered Put (Married Put) Vs Long Condor (Long Call Condor) Options Trading Strategy Comparison

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

Covered Put (Married Put) Vs Long Condor (Long Call Condor)

  Covered Put (Married Put) Long Condor (Long Call Condor)
Covered Put (Married Put) Logo Long Condor (Long Call Condor) Logo
About Strategy 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 A Long Call Condor is a neutral market view strategy with a limited risk and a limited profit. The long call condor investor is looking for little or no movement in the underlying. It is a 4 leg strategy which involves buying 2 ITM Calls and 2 OTM Calls at different strike price with the same expiry date. The strategy is similar as long butterfly strategy with the difference being in the strike prices selected. Suppose Nifty is currently trading at 10,400. The long call condor strategy can be used if expect very little volatility in the index and market to largely remain range bound. To profit in such a market scenario lets: Long Call Condor Options Strategy OrdersExample NIFTY Strike Price Buy 1 ITM CallNIFTY18APR10200C... Read More
Market View Bearish Neutral
Strategy Level Advance Advance
Options Type Put + Underlying Call
Number of Positions 2 4
Risk Profile Unlimited Limited
Reward Profile Limited Limited
Breakeven Point Futures Price + Premium Received

When and how to use Covered Put (Married Put) and Long Condor (Long Call Condor)?

  Covered Put (Married Put) Long Condor (Long Call Condor)
When to use?

The Covered Put works well when the market is moderately Bearish

The Long Call Condor works well when you expect the price of the underlying to be range bound in the coming days. In other words, when the trader is anticipating minimal price movement in the underlying during the lifetime of the options.

Market View Bearish

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

Neutral

When you are unsure about the direction in the movement in the price of the underlying but are expecting little volatility in it in the near future.

Action 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.

  • Buy Deep ITM Call Option
  • Buy Deep OTM Call Option
  • Sell ITM Call Option
  • Sell OTM Call Option

Suppose Nifty is currently trading at 10,400. You expect little volatility in the index and market to largely remain range bound. To profit in such a market scenario, you can buy buy 1 ITM Nifty Call Option at 10,200, sells 1 ITM Nifty Call Option 10,300, sell 1 OTM Call Option at 10,500 and buy 1 OTM Nifty Call Option at 10,800. The Net debit of premium is the maximum possible loss while your maximum profit will be when Nifty is between the strike prices of 2 short calls on expiry.

Breakeven Point 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.


There are 2 break even points in this strategy. The upper break even is hit when the underlying price is equal to the difference between higher strike price and net premium paid. The lower break even is hit when the underlying price is equal to the total of lower strike price and net premium paid.

Lower Breakeven = Lower Strike Price + Net Premium

Upper breakeven = Higher Strike Price - Net Premium

Compare Risks and Rewards (Covered Put (Married Put) Vs Long Condor (Long Call Condor))

  Covered Put (Married Put) Long Condor (Long Call Condor)
Risks 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

Limited

The maximum risk in a long call condor strategy is equal to the net premium paid at the time of entering the trade. The max risk is when the price of the underlying equal to or below the lower strike price or when the underlying price is equal to or above the higher strike price of Options in trade at expiration time.

Rewards 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.

Limited

The maximum profit in a long call condor strategy is realized when the price of the underlying is trading between the two middle strikes at time of expiration.

Maximum Profit Scenario

Underlying goes down and Options exercised

Both ITM Calls exercised

Max Profit = Strike Price of Lower Strike Short Call - Strike Price of Lower Strike Long Call - Net Premium Paid

Maximum Loss Scenario

Underlying goes up and Options exercised

All Options exercised or not exercised

Max Loss = Net Premium Paid

Pros & Cons or Covered Put (Married Put) and Long Condor (Long Call Condor)

  Covered Put (Married Put) Long Condor (Long Call Condor)
Advantages

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.

It allows you to profit from range bound underlying at low capital. The profit is high with limited risk exposure.

The maximum profit for the condor trade may be low in relation to other trading strategies but it has a comparatively wider profit zone.

Disadvantage

The risks can be huge if the prices increases steeply.

Strike prices selected may have an impact on the potential of profit.

Brokerage and taxes makes a significant impact on the profits from this strategy. The cost of trading increases with number of legs. This strategy has 4 legs and thus the brokerage cost is higher.

Simillar Strategies Bear Put Spread, Bear Call Spread Long Put Butterfly, Short Call Condor, Short Strangle







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