Chittorgarh.com Logo
Loading...
Compare Strategies:

Long Call Vs Bear Put Spread Options Trading Strategy Comparison

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

Long Call Vs Bear Put Spread

  Long Call Bear Put Spread
Long Call Logo Bear Put Spread Logo
About Strategy A Long Call Option trading strategy is one of the basic strategies. In this strategy, a trader is Bullish in his market view and expects the market to rise in near future. The strategy involves taking a single position of buying a Call Option (either ITM, ATM or OTM). This strategy has limited risk (max loss is premium paid) and unlimited profit potential. When the trader goes long on call, the trader buys a Call Option and later sells it to earn profits if the price of the underlying asset goes up. When the trader buys a call, he pays the option premium in exchange for the right (but not the obligation) to buy share or index at a fixed price by a certain expiry date. This premium is the only amount at-the-risk for trader in case the mark... Read More The Bear Put strategy involves selling a Put Option while simultaneously buying a Put option. Contrary to Bear Call Spread, here you pay the higher premium and receive the lower premium. So there is a net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear put debit spread as a net debit is taken upon entering the trade. This strategy has a limited risk as well as limited rewards. How to use the bear put spread options strategy? The bear put spread strategy looks like... Read More
Market View Bullish Bearish
Strategy Level Beginners Advance
Options Type Call Put
Number of Positions 1 2
Risk Profile Limited Limited
Reward Profile Unlimited Limited
Breakeven Point Strike Price + Premium Strike Price of Long Put - Net Premium

When and how to use Long Call and Bear Put Spread?

  Long Call Bear Put Spread
When to use?

A long call Option strategy works well when you expect the underlying instrument to move positively in the recent future.

If you expect XYZ company to do well in near future then you can buy Call Options of the company. You will earn the profit if the price of the company shares closes above the Strike Price on the expiry date. However, if underlying shares don't do well and move downwards on expiry date you will incur losses (i.e. lose premium paid).

The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.

Market View Bullish

When you're expecting a rise in the price of the underlying and increase in volatility.

Bearish

When you are expecting the price of the underlying to moderately drop.

Action
  • Buy Call Option

A long call strategy involves buying a call option only. So if you expect Reliance to do well in near future then you can buy Call Options of Reliance. You will earn a profit if the price of Reliance shares closes above the Strike price on the expiry date. However, if Reliance shares don't move up within the expiry date you will incur losses.

  • Buy ITM Put Option
  • Sell OTM Put Option

Breakeven Point Strike Price + Premium

The break-even point for Long Call strategy is the sum of the strike price and premium paid. Traders earn profits if the price of the underlying asset moves above the break-even point. Traders loose premium if the price of the underlying asset falls below the break-even point.

Strike Price of Long Put - Net Premium

The breakeven point is achieved when the price of the underlying is equal to strike price of long Put minus net premium.

Compare Risks and Rewards (Long Call Vs Bear Put Spread)

  Long Call Bear Put Spread
Risks Limited

The risk is limited to the premium paid for the call option irrespective of the price of the underlying on the expiration date.

Max Loss = Premium Paid

Limited

The maximum loss is limited to net premium paid. It occurs when the price of the underlying is less than strike price of long Put..

Max Loss = Net Premium Paid.

Rewards Unlimited

There is no limit to maximum profit attainable in the long call option strategy. The trade gets profitable when price of the underlying is greater than strike price plus premium.

Profit = Price of Underlying - (Strike Price + Premium Paid)

Limited

The maximum profit is achieved when the strike price of short Put is greater than the price of the underlying..

Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid.

Maximum Profit Scenario

Underlying closes above the strike price on expiry.

Underlying goes down and both options exercised

Maximum Loss Scenario

Underlying closes below the strike price on expiry.

Underlying goes up and both options not exercised

Pros & Cons or Long Call and Bear Put Spread

  Long Call Bear Put Spread
Advantages

Buying a Call Option instead of the underlying allows you to gain more profits by investing less and limiting your losses to minimum.

Risk is limited. It reduces the cost of investment.

Disadvantage

Call options have a limited lifespan. So, in case the price of your underlying stock is not higher than the strike price before the expiry date, the call option will expire worthlessly and you will lose the premium paid.

The profit is limited.

Simillar Strategies Protective Put, Covered Put/Married Put, Bull Call Spread Bear Call Spread, Bull Call Spread