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Compare Long Combo and Long Straddle (Buy Straddle) options trading strategies. Find similarities and differences between Long Combo and Long Straddle (Buy Straddle) strategies. Find the best options trading strategy for your trading needs.
| Long Combo | Long Straddle (Buy Straddle) | |
|---|---|---|
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| 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 Long Straddle (or Buy Straddle) is a neutral strategy. This strategy involves simultaneously buying a call and a put option of the same underlying asset, same strike price and same expire date. A Long Straddle strategy is used in case of highly volatile market scenarios wherein you expect a big movement in the price of the underlying but are not sure of the direction. Such scenarios arise when company declare results, budget, war-like situation etc. This is an unlimited profit and limited risk strategy. The profit earns in this strategy is unlimited. Higher volatility results in higher profits. The maximum loss is limited to the net premium paid. The max loss occurs when underlying asset price on expire remains at the strike price. ... Read More |
| Market View | Bullish | Neutral |
| Strategy Level | Advance | Beginners |
| Options Type | Call + Put | Call + Put |
| Number of Positions | 2 | 2 |
| Risk Profile | Unlimited | Limited |
| Reward Profile | Unlimited | Unlimited |
| Breakeven Point | Call Strike + Net Premium | 2 break-even points |
| Long Combo | Long Straddle (Buy Straddle) | |
|---|---|---|
| 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 strategy is perfect to use when there is market volatility expected due to results, elections, budget, policy change, war etc. |
| Market View | Bullish When you are expecting the price of the underlying to move up in near future. |
Neutral When you are not sure on the direction the underlying would move but are expecting the rise in its volatility. |
| Action |
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| Breakeven Point | Call Strike + Net Premium |
2 break-even points A straddle has two break-even points. Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call + Net Premium |
| Long Combo | Long Straddle (Buy Straddle) | |
|---|---|---|
| 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 for long straddle strategy is limited to the net premium paid. It happens the price of underlying is equal to strike price of options. Maximum 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. |
Unlimited There is unlimited profit opportunity in this strategy irrespective of the direction of the underlying. Profit occurs when the price of the underlying is greater than strike price of long Put or lesser than strike price of long Call. |
| Maximum Profit Scenario | Underlying goes up and Call option exercised |
Max profit is achieved when at one option is exercised. |
| Maximum Loss Scenario | Underlying goes down and Put option exercised |
When both options are not exercised. This happens when underlying asset price on expire remains at the strike price. |
| Long Combo | Long Straddle (Buy Straddle) | |
|---|---|---|
| Advantages | Brings down the cost of investing in a Bullish stocks. And delivers high returns if prices move up. |
Earns you unlimited profit in a volatile market while minimizing the loss. |
| Disadvantage | Losses can be high if prices don't move as expected. |
The price change has to be bigger to make good profits. |
| Simillar Strategies | Long Strangle, Short Straddle |
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