Compare Strategies:

Synthetic Call Vs Short Condor (Short Call Condor) Options Trading Strategy Comparison

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

Synthetic Call Vs Short Condor (Short Call Condor)

  Synthetic Call Short Condor (Short Call Condor)
Synthetic Call Logo Short Condor (Short Call Condor) 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. A Short Call Condor (or Short Condor) is a neutral strategy with a limited risk and a limited profit. The short condor strategy is suitable for a high volatile underlying. The goal of this strategy is to profit from a stock price moving up or down beyond the highest or lowest strike prices of the position. The strategy is similar to Short Call Butterfly strategy with the difference being in the strike prices selected. Suppose Nifty is currently trading at 10,400. If the trader is expecting high volatility in the index due to specific events i.e. budget, results, and elections, he could choose the Short Condor strategy to profit in such a market scenario. The strategy could be constructed as below: Short Condor Options Strategy ... Read More
Market View Bullish Volatile
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

When and how to use Synthetic Call and Short Condor (Short Call Condor)?

  Synthetic Call Short Condor (Short Call Condor)
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.

The Short Call Condor works well when you expect the price of the underlying to be very volatile. In other words, when the trader is anticipating massive price movements (in any direction) in the underlying during the lifetime of the options.

Market View Bullish
Volatile

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 ITM Call Option + Buy OTM Call Option + Sell Deep OTM Call Option + Sell Deep ITM Call Option

Suppose Nifty is trading at 10,400. If you expect high volatility in the Nifty in the coming days then you can execute Short Call Condor by selling 1 ITM Nifty Call at 10,200, buying 1 ITM Call at 10,300, buying 1 OTM Call Option at 10, 500 and selling 1 OTM Nifty Call at 10, 600. Your maximum loss will be if Nifty closes in the range of 10,300 to 10,500 on expiry while maximum profit will be on either side of upper or lower strikes.

Breakeven Point Underlying Price + Put 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 strike price of highest strike shot call and net premium paid. The lower break even is hit when the underlying price is equal to the strike price of lowest strike short call and net premium paid.

Lower Breakeven = Lower Strike Price + Net Premium

Upper breakeven = Higher Strike Price - Net Premium

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

  Synthetic Call Short Condor (Short Call Condor)
Risks Limited

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

Max Loss = Premium Paid

Limited

This is a limited risk strategy. The maximum risk in a short call condor strategy is calculated as below:

Max Loss = Strike Price of Lower Strike Long Call - Strike Price of Lower Strike Short Call - Net Premium Received + Commissions Paid

The max risk is when the price of the underlying remains in between strike price of 2 long calls.

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 maximum profit in a short call condor strategy is realized when the price of the underlying is trading outside the range at time of expiration.<.p>

Max Profit = Strike Price of Lower Strike Short Call - Strike Price of Lower Strike Long Call - Net Premium Paid

Maximum Profit Scenario

Underlying goes up

All options exercised or not exercised

Maximum Loss Scenario

Underlying goes down and option exercised

Both ITM Calls exercised

Pros & Cons or Synthetic Call and Short Condor (Short Call Condor)

  Synthetic Call Short Condor (Short Call Condor)
Advantages

Provides protection to your long term holdings.

It allows you to profit from highly volatile underlying assets moving in any direction.

The maximum profit for the condor trade may be low in relation to other trading strategies but it has a comparatively wider profit zone.

Earn profit with little or no investment as you will have a credit of net premiums.

Disadvantage

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

Strike prices selected may have an impact on the potential of profit.

Brokerage and taxes make a significant impact on the profits from this strategy. The cost of trading increases with the number of legs. This strategy has 4 legs and thus the brokerage cost is higher.

Simillar Strategies Married Put Long Put Butterfly, Short Call Condor, Short Strangle







Search Chittorgarh.com:

Download Our Mobile App

Android App iOS App