Chittorgarh.com Logo
Loading...
Compare Strategies:

Synthetic Call Vs Short Call Butterfly Options Trading Strategy Comparison

Compare Synthetic Call and Short Call Butterfly options trading strategies. Find similarities and differences between Synthetic Call and Short Call Butterfly strategies. Find the best options trading strategy for your trading needs.

Synthetic Call Vs Short Call Butterfly

  Synthetic Call Short Call Butterfly
Synthetic Call Logo Short Call Butterfly Logo
About Strategy A Synthetic Call strategy is used by traders who are currently holding the underlying asset and are Bullish on it for the long term. But he is also worried about the downside risks in near future. This strategy offers unlimited reward potential with limited risk. The strategy is used by buying PUT OPTION of the underlying you are holding for long. If the price of the underlying rises then you make profits on holdings. If it falls then your loss will be limited to the premium paid for PUT OPTION. Short Call Butterfly (or Short Butterfly) is a neutral strategy similar to Long Butterfly but bullish on the volatility. This strategy is a limited risk and limited profit strategy. This strategy consists of two long calls at a middle strike (or ATM) and one short call each at a lower and upper strike. All the options must have the same expiration date. Also, the upper and lower strikes (or wings) must both be equidistant from the middle strike (or body). In simple terms, it involves Sell 1 ITM Call, Buy 2 ATM Calls and Sell 1 OTM Call. The strike prices of all Options should be at equal distance from the current price as shown in the example below. The usual Short Butterfly strategy looks like as below for NIFTY current index value as 1... Read More
Market View Bullish 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 + Put Premium 2 Break-even Points

When and how to use Synthetic Call and Short Call Butterfly?

  Synthetic Call Short Call Butterfly
When to use?

A Synthetic Call option strategy is when a trader is Bullish on long term holdings but is also concerned with the associated downside risk.

This strategy is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc.

Market View Bullish
Neutral

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

Action
  • Buy Underlying
  • Buy Put Option

The strategy is used by buying PUT OPTION of the underlying you're holding for long. If the price of the underlying rises then you make profits on holdings. If it falls then your loss will be limited to the premium paid for PUT OPTION.

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

Breakeven Point Underlying Price + Put Premium
2 Break-even Points

There are 2 break even points in this strategy.

  1. Lower Break-even = Lower Strike Price + Net Premium
  2. Upper Break-even = Higher Strike Price - Net Premium

Compare Risks and Rewards (Synthetic Call Vs Short Call Butterfly)

  Synthetic Call Short Call Butterfly
Risks Limited

Maximum loss happens when price of the underlying moves above strike price of Put.

Max Loss = Premium Paid

Limited

The maximum risk is limited.

Maximum Risk = Higher strike price- Lower Strike Price - Net Premium

Rewards Unlimited

Maximum profit is realized when price of underlying moves above purchase price of underlying plus premium paid for Put Option.

Profit = (Current Price of Underlying - Purchase Price of Underlying) - Premium Paid

Limited

The profit is limited to the net premium received. This happens when the price of the underlying is trading beyond the range of strike prices at expiration date.

Maximum Profit Scenario

Underlying goes up

All Options exercised or not exercised

Maximum Loss Scenario

Underlying goes down and option exercised

Only ITM Call exercised

Pros & Cons or Synthetic Call and Short Call Butterfly

  Synthetic Call Short Call Butterfly
Advantages

Provides protection to your long term holdings.

This strategy requires no investment as net premium is positive and received. It allows you to benefit from high volatile market scenarios without the need to speculate on the direction of price movement.

Disadvantage

You can incur losses if underlying goes down and the option is exercised.

Profitability depends on significant movement in the price of the underlying.

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