Chittorgarh.com Logo
Loading...
Compare Strategies:

Short Put Vs Bull Call Spread Options Trading Strategy Comparison

Compare Short Put and Bull Call Spread options trading strategies. Find similarities and differences between Short Put and Bull Call Spread strategies. Find the best options trading strategy for your trading needs.

Short Put Vs Bull Call Spread

  Short Put Bull Call Spread
Short Put Logo Bull Call Spread Logo
About Strategy A short put is another Bullish trading strategy wherein your view is that the price of an underlying will not move below a certain level. The strategy involves entering into a single position of selling a Put Option. It has low profit potential and is exposed to unlimited risk. A short put strategy involves selling a Put Option only. For example if you see that the shares of a Company A will not move below Rs 1000 then you sell the Put Option of that stock at Rs 1000 and receive the premium amount. The premium received will be the maximum profit you can earn from this trade. However, if the price of the underlying moves below 1000 then you will incur unlimited losses. A Bull Call Spread (or Bull Call Debit Spread) strategy is meant for investors who are moderately bullish of the market and are expecting mild rise in the price of underlying. The strategy involves taking two positions of buying a Call Option and selling of a Call Option. The risk and reward in this strategy is limited. A Bull Call Spread strategy involves Buy ITM Call Option and Sell OTM Call Option.For example, if you are of the view that NIFTY will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell Nifty Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised.
Market View Bullish Bullish
Strategy Level Beginners Beginners
Options Type Put Call
Number of Positions 1 2
Risk Profile Unlimited Limited
Reward Profile Limited Limited
Breakeven Point Strike Price - Premium Strike price of purchased call + net premium paid

When and how to use Short Put and Bull Call Spread?

  Short Put Bull Call Spread
When to use?

Short Put works well when you're Bullish that the price of the underlying will not fall beyond a certain level.

A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future.

Market View Bullish

When you are expecting the price or volatility of the underlying to increase marginally.

Bullish

When you are expecting a moderate rise in the price of the underlying.

Action
  • Sell Put Option

A short put strategy involves selling a Put Option only. So if you see that the shares of a Company A will not move below a 1000 then you sell the Put Option of that stock at 1000 and receive the premium amount. The premium received will be the maximum profit you can earn from this deal. However, if the price of the underlying moves below 1000 than you will incur losses.

  • Buy ITM Call Option
  • Sell OTM Call Option

A Bull Call Spread strategy involves Buy ITM Call Option + Sell OTM Call Option.

For example, if you are of the view that Nifty will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell NIFTY 50 Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised.

Breakeven Point Strike Price - Premium
Strike price of purchased call + net premium paid

Compare Risks and Rewards (Short Put Vs Bull Call Spread)

  Short Put Bull Call Spread
Risks Unlimited

There is no limit to losses incurred in the trade. The risk is when the price of the underlying falls, and the Put is exercised. You are then obliged to buy the underlying at the strike price.

Limited

The trade will result in a loss if the price of the underlying decreases at expiration. The maximum loss is limited to net premium paid.

Max Loss = Net Premium Paid

Max Loss happens when the strike price of Call is less than or equal to price of the underlying.

Rewards Limited

The profit is limited to premium received in your account when you sell the Put Option.

Limited

Limited To The Difference Between Two Strike Prices Minus Net Premium

Maximum profit happens when the price of the underlying rises above strike price of two Calls. The profit is limited to the difference between two strike prices minus net premium paid.

Max Profit = (Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid

Maximum Profit Scenario

Underlying doesn't go down and options remain exercised.

Both options exercised

Maximum Loss Scenario

Underlying goes down and options remain exercised.

Both options unexercised

Pros & Cons or Short Put and Bull Call Spread

  Short Put Bull Call Spread
Advantages

It allows you benefit from time decay. And earn income in a rising or range bound market scenario.

Instead of straightaway buying a Call Option, this strategy allows you to reduce cost and risk of your investments.

Disadvantage

It is a high risk strategy and may cause huge losses if the price of the underlying falls steeply.

Profit potential is limited.

Simillar Strategies

Bull Put Spread, Covered Call, Short Straddle

Collar, Bull Put Spread