Long Combo Vs Collar 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.

The Collar strategy is perfect if you're Bullish for the underlying you're holding but are concerned with risk and want to protect your losses.

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

When you are of the view that the price of the underlying will move up but also want to protect the downside.

• Sell OTM Put Option
• Buy OTM Call Option

• Buy Underlying
• Buy 1 ATM Put Option
• Sell 1 OTM Call Option

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.

You will incur maximum losses when price of the underlying is less than the strike price of the Put Option.

Max Loss = Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received

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.

You will incur maximum profit when price of underlying is greater than the strike price of call option.

Max Profit = Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received

Underlying goes up and Call option exercised

Underlying goes up and Call option exercised

Underlying goes down and Put option exercised

Underlying goes down and Put option exercised

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

It protects the losses on underlying asset.

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

The profit is limited