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Long Combo Vs Bear Put Spread Options Trading Strategy Comparison

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

Long Combo Vs Bear Put Spread

  Long Combo Bear Put Spread
Long Combo Logo Bear Put 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. 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 Advance Advance
Options Type Call + Put Put
Number of Positions 2 2
Risk Profile Unlimited Limited
Reward Profile Unlimited Limited
Breakeven Point Call Strike + Net Premium Strike Price of Long Put - Net Premium

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

  Long Combo Bear Put 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 drop.

Action
  • Sell OTM Put Option
  • Buy OTM Call Option

  • Buy ITM Put Option
  • Sell OTM Put Option

Breakeven Point Call Strike + Net Premium
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 Combo Vs Bear Put Spread)

  Long Combo Bear Put 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 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

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 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 goes up and Call option exercised

Underlying goes down and both options exercised

Maximum Loss Scenario

Underlying goes down and Put option exercised

Underlying goes up and both options not exercised

Pros & Cons or Long Combo and Bear Put Spread

  Long Combo Bear Put Spread
Advantages

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

Risk is limited. It reduces the cost of investment.

Disadvantage

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

The profit is limited.

Simillar Strategies Bear Call Spread, Bull Call Spread