Compare Strategies:

Short Strangle (Sell Strangle) Vs Long Call Butterfly Options Trading Strategy Comparison

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

Short Strangle (Sell Strangle) Vs Long Call Butterfly

  Short Strangle (Sell Strangle) Long Call Butterfly
Short Strangle (Sell Strangle) Logo Long Call Butterfly Logo
About Strategy The Short Strangle (or Sell Strangle) is a neutral strategy wherein a Slightly OTM Call and a Slightly OTM Put Options are sold simultaneously of same underlying asset and expiry date. This strategy can be used when the trader expects that the underlying stock will experience a very little volatility in the near term. It is a limited profit and unlimited risk strategy. The maximum profit earn is the net premium received. The maximum loss is achieved when the underlying moves either significantly upwards or downwards at expiration. A net credit is taken to enter into this strategy. For this reason, the Short Strangles are Credit Spreads. The usual Short Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY S... Read More Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price. Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls.... Read More
Market View Neutral Neutral
Strategy Level Advance Advance
Options Type Call + Put Call
Number of Positions 2 4
Risk Profile Unlimited Limited
Reward Profile Limited Limited
Breakeven Point two break-even points

When and how to use Short Strangle (Sell Strangle) and Long Call Butterfly?

  Short Strangle (Sell Strangle) Long Call Butterfly
When to use?

The Short Strangle is perfect in a neutral market scenario when the underlying is expected to be less volatile.

This strategy should be used when you're expecting no volatility in the price of the underlying.

Market View Neutral

When you are expecting little volatility and movement in the price of the underlying.

Neutral

Neutral on the underlying asset and bearish on the volatility.

Action
  • Sell OTM Call
  • Sell OTM Put

Sell 1 out-of-the-money put and sell 1 out-of-the-money call which belongs to same underlying asset and has the same expiry date.

  • Sell 2 ATM Call
  • Buy 1 ITM Call
  • Buy 1 OTM Call

Breakeven Point two break-even points

A strangle has two break-even points.

Lower Break-even = Strike Price of Put - Net Premium

Upper Break-even = Strike Price of Call+ Net Premium"


Upper Breakeven = Higher Strike Price - Net Premium

Lower Breakeven = Lower Strike Price + Net Premium

Compare Risks and Rewards (Short Strangle (Sell Strangle) Vs Long Call Butterfly)

  Short Strangle (Sell Strangle) Long Call Butterfly
Risks Unlimited

The maximum loss is unlimited in this strategy. You will incur losses when the price of the underlying moves significantly either upwards or downwards at expiration.

Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received

Or

Loss = Strike Price of Short Put - Price of Underlying - Net Premium Received

Limited

Risk in the Long Call Butterfly options strategy is limited to the net premium paid.

Rewards Limited

For maximum profit, the price of the underlying on expiration date must trade between the strike prices of the options. The maximum profit is limited to the net premium received while selling the Options.

Maximum Profit = Net Premium Received

Limited

Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit.

Maximum Profit Scenario

Both Option not exercised

Only ITM Call exercised

Maximum Loss Scenario

One Option exercised

All options exercised or all options not exercised.

Pros & Cons or Short Strangle (Sell Strangle) and Long Call Butterfly

  Short Strangle (Sell Strangle) Long Call Butterfly
Advantages

The strategy offers higher chance of profitability in comparison to Short Straddle due to selling of OTM Options.

Profit earning strategy with limited risk in a less volatile market.

Disadvantage

Limited reward with high risk exposure.

Premiums and brokerage paid on multiple position may eat your profits.

Simillar Strategies Short Straddle, Long Strangle
Compare
Short Strangle Vs Long Call
Short Strangle Vs Short Call
Short Strangle Vs Long Put
Short Strangle Vs Short Put
Short Strangle Vs Bull Call Spread
Short Strangle Vs Bull Put Spread
Short Strangle Vs Synthetic Call
Short Strangle Vs Covered Call
Short Strangle Vs Long Combo
Short Strangle Vs Collar
Short Strangle Vs Bear Call Spread
Short Strangle Vs Bear Put Spread
Short Strangle Vs Protective Call
Short Strangle Vs Covered Put
Short Strangle Vs Long Straddle
Short Strangle Vs Short Straddle
Short Strangle Vs Long Strangle
Short Strangle Vs Short Call Butterfly
Short Strangle Vs Long Condor
Short Strangle Vs Short Condor
Short Strangle Vs Box Spread
Short Strangle Vs Short Box
Short Strangle Vs Covered Strangle
Long Call Butterfly Vs Long Call
Long Call Butterfly Vs Short Call
Long Call Butterfly Vs Long Put
Long Call Butterfly Vs Short Put
Long Call Butterfly Vs Bull Call Spread
Long Call Butterfly Vs Bull Put Spread
Long Call Butterfly Vs Synthetic Call
Long Call Butterfly Vs Covered Call
Long Call Butterfly Vs Long Combo
Long Call Butterfly Vs Collar
Long Call Butterfly Vs Bear Call Spread
Long Call Butterfly Vs Bear Put Spread
Long Call Butterfly Vs Protective Call
Long Call Butterfly Vs Covered Put
Long Call Butterfly Vs Long Straddle
Long Call Butterfly Vs Short Straddle
Long Call Butterfly Vs Long Strangle
Long Call Butterfly Vs Short Call Butterfly
Long Call Butterfly Vs Long Condor
Long Call Butterfly Vs Short Condor
Long Call Butterfly Vs Box Spread
Long Call Butterfly Vs Short Box
Long Call Butterfly Vs Covered Strangle







Search Chittorgarh.com:

Download Our Mobile App

Android App iOS App