Long Combo Vs Long Straddle (Buy Straddle) 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 strategy is perfect to use when there is market volatility expected due to results, elections, budget, policy change, war etc.

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

When you are not sure on the direction the underlying would move but are expecting the rise in its volatility.

• Sell OTM Put Option
• Buy OTM Call Option

• Buy Call Option
• Buy Put Option

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 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 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

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.

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.

Underlying goes up and Call option exercised

Max profit is achieved when at one option is exercised.

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.

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.

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

The price change has to be bigger to make good profits.