When it comes to Options Trading, there are different complexities involved in terms of choosing a specific strategy that works the best for you.
At the same time, each strategy has its own set of advantages as well as limitations, thus making the concept of options trading even more challenging. Thus, in case you are looking to fit a particular strategy in your option trades, just check few areas before you make a choice.
In this detailed comparison of Covered Call Vs Collar Strategy options trading strategies, we will be looking at the below-mentioned aspects and more:
- Current Market Position
- Your Risk Appetite
- Your Trading Experience
- Profit Potential
- Intention and Expectation of a trader
- Break-even point of your trade
Apart from the Covered Call Vs Collar Strategy strategies, there are more than 25 comparisons of each of these strategies with other option strategies. With all these comparisons, you should be able to filter the ones that work the best for you.
Here is the detailed Covered Call Vs Collar Strategy comparison:
| Comparison Aspect | Collar Strategy | Covered Call |
| View |  |  |
| Strategy Introduction | The collar strategy is used when the trader is mildly bullish towards the market. He expects the prices to go up, but at the same time, he wants to limit his risks if the prices go down. It is ideally not used by the...more | In a Covered Call Strategy, the trader holds a long position in a security and at the same time, he writes the call options on the same security to generate income through premiums...more |
| Investor Obligation | The trader is able to benefit from the price rise by holding the underlying security and receives ownership benefits like dividends. At the same time, the risks are limited with the use of protective put. | Pay the difference as a loss in case the stock value falls beyond the investor set price. |
| Market Position | Moderately Bullish | Moderately Bullish or Neutral |
| Strategy Level Suitable for | Experts | Beginners |
| Options Traded | Call, Put and Underlying | Call |
| Number of Positions | 3 | 2 (Underlying & Call) |
| Action Needed | Sell OTM Call, Buy OTM Put, Hold underlying | Sell Call Option |
| Risk for You | Limited | Unlimited |
| Profit Potential | Limited | Limited |
| Break Even Point for Investor | Price of Features - Call Premium + Put Premium | Strike Price MINUS Premium |
| Investor Intention | Let Options Expire Worthlessly | Make Money from Premium Received |
| Investor Expectation | Prices of Assets Go Up | Limited Price Movements |
| Strategy Summary | High Potential | Cautious |
| Advantages | Dividend Benefits, Limited Risk | Generates Steady Income |
| Disadvantages | Limited Profits | Limited Profit, Unlimited Risk |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | NA | NA |
| More Comparisons | Collar Strategy Vs Short Put | Covered Call Vs Short Put |
| Collar Strategy Vs Long Combo | Covered Call Vs Long Combo | |
| Collar Strategy Vs Synthetic Call | Covered Call Vs Synthetic Call | |
| Collar Strategy Vs Long Put | Covered Call Vs Short Call | |
| Collar Strategy Vs Long Call | Covered Call Vs Long Call | |
| Collar Strategy Vs Covered Call | Covered Call Vs Long Put | |
| Collar Strategy Vs Covered Put | Covered Call Vs Covered Put | |
| Collar Strategy Vs Protective Call | Covered Call Vs Protective Call | |
| Collar Strategy Vs Short Box | Covered Call Vs Short Box | |
| Collar Strategy Vs Long Call Condor | Covered Call Vs Long Call Condor | |
| Collar Strategy Vs Short Call Condor | Covered Call Vs Short Call Condor | |
| Collar Strategy Vs Box Spread | Covered Call Vs Box Spread | |
| Collar Strategy Vs Short Strangle | Covered Call Vs Short Strangle | |
| Collar Strategy Vs Long Strangle | Covered Call Vs Long Strangle | |
| Collar Strategy Vs Short Call | Covered Call Vs Collar Strategy | |
| Collar Strategy Vs Long Straddle | Covered Call Vs Long Straddle | |
| Collar Strategy Vs Short Straddle | Covered Call Vs Short Straddle | |
| Collar Strategy Vs Long Call Butterfly | Covered Call Vs Long Call Butterfly | |
| Collar Strategy Vs Short Call Butterfly | Covered Call Vs Short Call Butterfly | |
| Collar Strategy Vs Bear Call Spread | Covered Call Vs Bear Call Spread | |
| Collar Strategy Vs Bear Put Spread | Covered Call Vs Bear Put Spread | |
| Collar Strategy Vs Bull Call Spread | Covered Call Vs Bull Put Spread | |
| Collar Strategy Vs Bull Put Spread | Covered Call Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Covered Call Vs Collar Strategy option strategies.
At the same time, if you are in a moderately Bullish Market situation and are looking for consistent but limited profits for your share market trades, then you can opt to go for the Collar Strategy. There is a limited scope of risk involved in this strategy too.
This needs to be known that the profit you get using this strategy is also limited in scope.
However, if the market is moderately bullish or neutral with a high-risk appetite with a limitation on the profit – then you can opt for a covered call option strategy.
Furthermore, as told above, it also depends on the market situation.
In case you are looking to trade in options segment or share market in general, let us assist you in that. Just fill the form below and we will take you to the steps ahead.
