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Short Put Vs Long Combo Options Trading Strategy Comparison

Compare Short Put and Long Combo options trading strategies. Find similarities and differences between Short Put and Long Combo strategies. Find the best options trading strategy for your trading needs.

Short Put Vs Long Combo

  Short Put Long Combo
Short Put Logo Long Combo 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 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.
Market View Bullish Bullish
Strategy Level Beginners Advance
Options Type Put Call + Put
Number of Positions 1 2
Risk Profile Unlimited Unlimited
Reward Profile Limited Unlimited
Breakeven Point Strike Price - Premium Call Strike + Net Premium

When and how to use Short Put and Long Combo?

  Short Put Long Combo
When to use?

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

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.

Market View Bullish

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

Bullish

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

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.

  • Sell OTM Put Option
  • Buy OTM Call Option

Breakeven Point Strike Price - Premium
Call Strike + Net Premium

Compare Risks and Rewards (Short Put Vs Long Combo)

  Short Put Long Combo
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.

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.

Rewards Limited

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

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.

Maximum Profit Scenario

Underlying doesn't go down and options remain exercised.

Underlying goes up and Call option exercised

Maximum Loss Scenario

Underlying goes down and options remain exercised.

Underlying goes down and Put option exercised

Pros & Cons or Short Put and Long Combo

  Short Put Long Combo
Advantages

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

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

Disadvantage

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

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

Simillar Strategies

Bull Put Spread, Covered Call, Short Straddle