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

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

Protective Call (Synthetic Long Put) Vs Long Condor (Long Call Condor)

  Protective Call (Synthetic Long Put) Long Condor (Long Call Condor)
Protective Call (Synthetic Long Put) Logo Long Condor (Long Call Condor) Logo
About Strategy 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 A Long Call Condor is a neutral market view strategy with a limited risk and a limited profit. The long call condor investor is looking for little or no movement in the underlying. It is a 4 leg strategy which involves buying 2 ITM Calls and 2 OTM Calls at different strike price with the same expiry date. The strategy is similar as long butterfly strategy with the difference being in the strike prices selected. Suppose Nifty is currently trading at 10,400. The long call condor strategy can be used if expect very little volatility in the index and market to largely remain range bound. To profit in such a market scenario lets: Long Call Condor Options Strategy OrdersExample NIFTY Strike Price Buy 1 ITM CallNIFTY18APR10200C... Read More
Market View Bearish Neutral
Strategy Level Beginners Advance
Options Type Call + Underlying Call
Number of Positions 2 4
Risk Profile Limited Limited
Reward Profile Unlimited Limited
Breakeven Point Underlying Price - Call Premium

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

  Protective Call (Synthetic Long Put) Long Condor (Long Call Condor)
When to use?

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.

The Long Call Condor works well when you expect the price of the underlying to be range bound in the coming days. In other words, when the trader is anticipating minimal price movement in the underlying during the lifetime of the options.

Market View Bearish

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

Neutral

When you are unsure about the direction in the movement in the price of the underlying but are expecting little volatility in it in the near future.

Action
  • Sell Underlying Stock or Future
  • Buy ATM Call Option

  • Buy Deep ITM Call Option
  • Buy Deep OTM Call Option
  • Sell ITM Call Option
  • Sell OTM Call Option

Suppose Nifty is currently trading at 10,400. You expect little volatility in the index and market to largely remain range bound. To profit in such a market scenario, you can buy buy 1 ITM Nifty Call Option at 10,200, sells 1 ITM Nifty Call Option 10,300, sell 1 OTM Call Option at 10,500 and buy 1 OTM Nifty Call Option at 10,800. The Net debit of premium is the maximum possible loss while your maximum profit will be when Nifty is between the strike prices of 2 short calls on expiry.

Breakeven Point 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.


There are 2 break even points in this strategy. The upper break even is hit when the underlying price is equal to the difference between higher strike price and net premium paid. The lower break even is hit when the underlying price is equal to the total of lower strike price and net premium paid.

Lower Breakeven = Lower Strike Price + Net Premium

Upper breakeven = Higher Strike Price - Net Premium

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

  Protective Call (Synthetic Long Put) Long Condor (Long Call Condor)
Risks 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

Limited

The maximum risk in a long call condor strategy is equal to the net premium paid at the time of entering the trade. The max risk is when the price of the underlying equal to or below the lower strike price or when the underlying price is equal to or above the higher strike price of Options in trade at expiration time.

Rewards 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

Limited

The maximum profit in a long call condor strategy is realized when the price of the underlying is trading between the two middle strikes at time of expiration.

Maximum Profit Scenario

Underlying goes down and Option not exercised

Both ITM Calls exercised

Max Profit = Strike Price of Lower Strike Short Call - Strike Price of Lower Strike Long Call - Net Premium Paid

Maximum Loss Scenario

Underlying goes down and Option exercised

All Options exercised or not exercised

Max Loss = Net Premium Paid

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

  Protective Call (Synthetic Long Put) Long Condor (Long Call Condor)
Advantages

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

It allows you to profit from range bound underlying at low capital. The profit is high with limited risk exposure.

The maximum profit for the condor trade may be low in relation to other trading strategies but it has a comparatively wider profit zone.

Disadvantage

Premium paid for Call Option may eat into your profits.

Strike prices selected may have an impact on the potential of profit.

Brokerage and taxes makes a significant impact on the profits from this strategy. The cost of trading increases with number of legs. This strategy has 4 legs and thus the brokerage cost is higher.

Simillar Strategies Long Put Long Put Butterfly, Short Call Condor, Short Strangle







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