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

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

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

  Covered Put (Married Put) Short Condor (Short Call Condor)
Covered Put (Married Put) Logo Short Condor (Short 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 Short Call Condor (or Short Condor) is a neutral strategy with a limited risk and a limited profit. The short condor strategy is suitable for a high volatile underlying. The goal of this strategy is to profit from a stock price moving up or down beyond the highest or lowest strike prices of the position. The strategy is similar to Short Call Butterfly strategy with the difference being in the strike prices selected. Suppose Nifty is currently trading at 10,400. If the trader is expecting high volatility in the index due to specific events i.e. budget, results, and elections, he could choose the Short Condor strategy to profit in such a market scenario. The strategy could be constructed as below: Short Condor Options Strategy ... Read More
Market View Bearish Volatile
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 Short Condor (Short Call Condor)?

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

The Covered Put works well when the market is moderately Bearish

The Short Call Condor works well when you expect the price of the underlying to be very volatile. In other words, when the trader is anticipating massive price movements (in any direction) 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.

Volatile

When you are unsure about the direction in the movement in the price of the underlying but are expecting high 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 ITM Call Option + Buy OTM Call Option + Sell Deep OTM Call Option + Sell Deep ITM Call Option

Suppose Nifty is trading at 10,400. If you expect high volatility in the Nifty in the coming days then you can execute Short Call Condor by selling 1 ITM Nifty Call at 10,200, buying 1 ITM Call at 10,300, buying 1 OTM Call Option at 10, 500 and selling 1 OTM Nifty Call at 10, 600. Your maximum loss will be if Nifty closes in the range of 10,300 to 10,500 on expiry while maximum profit will be on either side of upper or lower strikes.

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 strike price of highest strike shot call and net premium paid. The lower break even is hit when the underlying price is equal to the strike price of lowest strike short call 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 Short Condor (Short Call Condor))

  Covered Put (Married Put) Short Condor (Short 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

This is a limited risk strategy. The maximum risk in a short call condor strategy is calculated as below:

Max Loss = Strike Price of Lower Strike Long Call - Strike Price of Lower Strike Short Call - Net Premium Received + Commissions Paid

The max risk is when the price of the underlying remains in between strike price of 2 long calls.

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 short call condor strategy is realized when the price of the underlying is trading outside the range at time of expiration.<.p>

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

Maximum Profit Scenario

Underlying goes down and Options exercised

All options exercised or not exercised

Maximum Loss Scenario

Underlying goes up and Options exercised

Both ITM Calls exercised

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

  Covered Put (Married Put) Short Condor (Short 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 highly volatile underlying assets moving in any direction.

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

Earn profit with little or no investment as you will have a credit of net premiums.

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 make a significant impact on the profits from this strategy. The cost of trading increases with the 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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