Long Combo Vs Bull Call Spread Options Trading Strategy Comparison

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.

A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future.

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

When you are expecting a moderate rise in the price of the underlying.

• Sell OTM Put Option
• Buy OTM Call Option

• Buy ITM Call Option
• Sell OTM Call Option

A Bull Call Spread strategy involves Buy ITM Call Option + Sell OTM Call Option.

For example, if you are of the view that Nifty will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell NIFTY 50 Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised.

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.

The trade will result in a loss if the price of the underlying decreases at expiration. The maximum loss is limited to net premium paid.

Max Loss = Net Premium Paid

Max Loss happens when the strike price of Call is less than or equal to price of the underlying.

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 To The Difference Between Two Strike Prices Minus Net Premium

Maximum profit happens when the price of the underlying rises above strike price of two Calls. The profit is limited to the difference between two strike prices minus net premium paid.

Max Profit = (Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid

Underlying goes up and Call option exercised

Both options exercised

Underlying goes down and Put option exercised

Both options unexercised

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

Instead of straightaway buying a Call Option, this strategy allows you to reduce cost and risk of your investments.

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

Profit potential is limited.