Chittorgarh.com Logo
Loading...
Compare Strategies:

Long Combo Vs Protective Call (Synthetic Long Put) Options Trading Strategy Comparison

Compare Long Combo and Protective Call (Synthetic Long Put) options trading strategies. Find similarities and differences between Long Combo and Protective Call (Synthetic Long Put) strategies. Find the best options trading strategy for your trading needs.

Long Combo Vs Protective Call (Synthetic Long Put)

  Long Combo Protective Call (Synthetic Long Put)
Long Combo Logo Protective Call (Synthetic Long Put) 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. The Protective Call strategy is a hedging strategy. In this strategy, a trader shorts position in the underlying asset (sell shares or sell futures) and buys an ATM Call Option to cover against the rise in the price of the underlying. This strategy is opposite of the Synthetic Call strategy. It is used when the trader is bearish on the underlying asset and would like to protect 'rise in the price' of the underlying asset. The risk is limited in the strategy while the rewards are unlimited. How to use a Protective Call trading strategy? The usual Protective Call Strategy looks like as below for State Bank of India (SBI) Shares which are currently traded at Rs 275 (SBI Spot Price): Protective Call Orders - SBI Stock Orde... Read More
Market View Bullish Bearish
Strategy Level Advance Beginners
Options Type Call + Put Call + Underlying
Number of Positions 2 2
Risk Profile Unlimited Limited
Reward Profile Unlimited Unlimited
Breakeven Point Call Strike + Net Premium Underlying Price - Call Premium

When and how to use Long Combo and Protective Call (Synthetic Long Put)?

  Long Combo Protective Call (Synthetic Long Put)
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 Protective Call option strategy is used when you are bearish in market view and want to short shares to benefit from it. The strategy minimizes your risk in the event of prime movements going against your expectations.

Market View Bullish

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

Bearish

When you are bearish on the underlying but want to protect the upside.

Action
  • Sell OTM Put Option
  • Buy OTM Call Option

  • Sell Underlying Stock or Future
  • Buy ATM Call Option

Breakeven Point Call Strike + Net Premium
Underlying Price - Call Premium

When the price of the underlying is equal to the total of the sale price of the underlying and premium paid.

Compare Risks and Rewards (Long Combo Vs Protective Call (Synthetic Long Put))

  Long Combo Protective Call (Synthetic Long Put)
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 is limited to the premium paid for buying the Call option. It occurs when the price of the underlying is less than the strike price of Call Option.

Maximum Loss = Call Strike Price - Sale Price of Underlying + 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

The maximum profit is unlimited in this strategy. The profit is dependent on the sale price of the underlying.

Profit = Sale Price of Underlying - Price of Underlying - Premium Paid

Maximum Profit Scenario

Underlying goes up and Call option exercised

Underlying goes down and Option not exercised

Maximum Loss Scenario

Underlying goes down and Put option exercised

Underlying goes down and Option exercised

Pros & Cons or Long Combo and Protective Call (Synthetic Long Put)

  Long Combo Protective Call (Synthetic Long Put)
Advantages

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

Minimizes the risk when entering into a short position while keeping the profit potential limited.

Disadvantage

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

Premium paid for Call Option may eat into your profits.

Simillar Strategies Long Put