Long Combo Vs Covered Put (Married Put) 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 Covered Put works well when the market is moderately Bearish

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

When you are expecting a moderate drop in the price and volatility of the underlying.

• Sell OTM Put Option
• Buy OTM Call Option

Suppose SBI is trading at 300. You believe that the price will remain range bound or mildly drop. The covered put allows you to benefit from this market view. In this strategy, you sell the underlying and also sell a Put Option of the underlying and receive the premium. You will benefit from drop in prices of SBI, the Put Option will minimize your risks. If there is no change in price then you keep the premium received as profit.

The break-even point is achieved when the price of the underlying is equal to the total of the sale price of underlying and premium received.

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 Maximum Loss is Unlimited as the price of the underlying can theoretically go up to any extent.

Loss = Price of Underlying - Sale Price of Underlying - 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.

The maximum profit is limited to the premiums received. The profit happens when the price of the underlying moves above strike price of Short Put.

Underlying goes up and Call option exercised

Underlying goes down and Options exercised

Underlying goes down and Put option exercised

Underlying goes up and Options exercised

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

Its an income generation strategy in a neutral or Bearish market. Also allows you to benefit from fall in prices, range bound movements or mild increase.

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

The risks can be huge if the prices increases steeply.