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Long Combo Vs Bull Call Spread Options Trading Strategy Comparison

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

Long Combo Vs Bull Call Spread

  Long Combo Bull Call Spread
Long Combo Logo Bull 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 Bull Call Spread (or Bull Call Debit Spread) strategy is meant for investors who are moderately bullish of the market and are expecting mild rise in the price of underlying. The strategy involves taking two positions of buying a Call Option and selling of a Call Option. The risk and reward in this strategy is limited. A Bull Call Spread strategy involves Buy ITM Call Option and 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 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.
Market View Bullish Bullish
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 purchased call + net premium paid

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

  Long Combo Bull 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.

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

Market View Bullish

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

Bullish

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

Action
  • 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.

Breakeven Point Call Strike + Net Premium
Strike price of purchased call + net premium paid

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

  Long Combo Bull 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 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.

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

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

Maximum Profit Scenario

Underlying goes up and Call option exercised

Both options exercised

Maximum Loss Scenario

Underlying goes down and Put option exercised

Both options unexercised

Pros & Cons or Long Combo and Bull Call Spread

  Long Combo Bull Call Spread
Advantages

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.

Disadvantage

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

Profit potential is limited.

Simillar Strategies Collar, Bull Put Spread







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