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Long Combo Vs Bear Call Spread Options Trading Strategy Comparison

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

Long Combo Vs Bear Call Spread

  Long Combo Bear Call Spread
Long Combo Logo Bear Call Spread Logo
About Strategy A long Combo strategy is a Bullish Trading Strategy employed when a trader is expecting the price of a stock, he is holding to move up. It involves selling an OTM Put and buying an OTM Call. The strategy requires less capital as the cost of Call Option is covered by premium received from Put Option. Say SBI shares are currently trading at Rs 500. You are bullish on it but doesn't want to invest or have capital to do it. You can use Long Combo strategy here by selling a Put option of SBI at strike price of Rs 400 and buying a Call Option at a strike price of Rs 600. You will earn premium on sell Put Option and pay premium on buying Call Option. you are investing less but will benefit if SBI shares rises as per your expectations. A Bear Call Spread strategy involves buying a Call Option while simultaneously selling a Call Option of lower strike price on same underlying asset and expiry date. You receive a premium for selling a Call Option and pay a premium for buying a Call Option. So your cost of investment is much lower. The strategy is less risky with the reward limited to the difference in premium received and paid. 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 call credit spread as a net credit is received upon entering the trade. The risk and reward both are limited in the strategy. How to use the bear call spread options strategy? The bear call spr... Read More
Market View Bullish Bearish
Strategy Level Advance Beginners
Options Type Call + Put Call
Number of Positions 2 2
Risk Profile Unlimited Limited
Reward Profile Unlimited Limited
Breakeven Point Call Strike + Net Premium Strike Price of Short Call + Net Premium Received

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

  Long Combo Bear Call Spread
When to use?

Long Combo strategy should be deployed when you're Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it.

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 are expecting the price of the underlying to move up in near future.

Bearish

When you are expecting the price of the underlying to moderately go down.

Action
  • Sell OTM Put Option
  • Buy OTM Call Option

  • Buy OTM Call Option
  • Sell ITM Call Option

Let's assume you're Bearish on Nifty and are expecting mild drop in the price. You can deploy Bear Call strategy by selling a Call Option with lower strike and buying a Call Option with higher strike. You will receive a higher premium for selling a Call while pay lower premium for buying a Call. The net premium will be your profit. If the price of Nifty rises, your loss will be limited to difference between two strike prices minus net premium.

Breakeven Point Call Strike + Net Premium
Strike Price of Short Call + Net Premium Received

The break even point is achieved when the price of the underlying is equal to strike price of the short Call plus net premium received.

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

  Long Combo Bear Call Spread
Risks Unlimited

Long Combo is a high risk strategy. You will start losing money when the price of the underlying moves below the lower strike price. Your losses can be unlimited depending on how low the price of underlying falls.

Limited

The maximum loss occurs when the price of the underlying moves above the strike price of long Call.

Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received

Rewards Unlimited

Long Combo is a high return strategy. You will earn profits if the underlying moves above the higher price of the underlying. Your profit will depend on how high the price of the underlying moves.

Limited

The maximum profit the net premium received. It occurs when the price of the underlying is greater than strike price of short Call Option.

Max Profit = Net Premium Received - Commissions Paid

Maximum Profit Scenario

Underlying goes up and Call option exercised

Underlying goes down and both options not exercised

Maximum Loss Scenario

Underlying goes down and Put option exercised

Underlying goes up and both options exercised

Pros & Cons or Long Combo and Bear Call Spread

  Long Combo Bear Call Spread
Advantages

Brings down the cost of investing in a Bullish stocks. And delivers high returns if prices move up.

It allows you to profit in a flat market scenario when you're expecting the underlying to mildly drop, be range bound or marginally rise.

Disadvantage

Losses can be high if prices don't move as expected.

Limited profit potential.

Simillar Strategies Bear Put Spread, Bull Call Spread