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Short Put Vs Long Condor (Long Call Condor) Options Trading Strategy Comparison

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

Short Put Vs Long Condor (Long Call Condor)

  Short Put Long Condor (Long Call Condor)
Short Put Logo Long Condor (Long Call Condor) 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 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 Bullish Neutral
Strategy Level Beginners Advance
Options Type Put Call
Number of Positions 1 4
Risk Profile Unlimited Limited
Reward Profile Limited Limited
Breakeven Point Strike Price - Premium

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

  Short Put Long Condor (Long Call Condor)
When to use?

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

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 Bullish

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

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 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 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 Strike Price - Premium

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 (Short Put Vs Long Condor (Long Call Condor))

  Short Put Long Condor (Long Call Condor)
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 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 Limited

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

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 doesn't go down and options remain 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 options remain exercised.

All Options exercised or not exercised

Max Loss = Net Premium Paid

Pros & Cons or Short Put and Long Condor (Long Call Condor)

  Short Put Long Condor (Long Call Condor)
Advantages

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

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

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

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

Bull Put Spread, Covered Call, Short Straddle

Long Put Butterfly, Short Call Condor, Short Strangle







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