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 Long Straddle 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 Long Straddle 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 Long Straddle comparison:
| Comparison Aspect | Long Straddle | Covered Call |
| View |  |  |
| Strategy Introduction | Long Straddle comes into play when the trader expects the market to move sharply, however, the direction of the movement cannot be predicted. The purpose of the strategy to allow the traders to benefit from volatile markets...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 should be able to trade based on his/her conviction that the markets will move, without being concerned about the direction of the movement. | Pay the difference as a loss in case the stock value falls beyond the investor set price. |
| Market Position | Neutral | Moderately Bullish or Neutral |
| Strategy Level Suitable for | Beginners | Beginners |
| Options Traded | Call, Put | Call |
| Number of Positions | 2 | 2 (Underlying & Call) |
| Action Needed | 1 ATM Call, 1 ATM Put | Sell Call Option |
| Risk for You | Limited | Unlimited |
| Profit Potential | Unlimited | Limited |
| Break Even Point for Investor | Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call + Net Premium | Strike Price MINUS Premium |
| Investor Intention | Put & Call Options Expire Worthlessly | Make Money from Premium Received |
| Investor Expectation | Sharp Market Movement | Limited Price Movements |
| Strategy Summary | Excellent & Simple | Cautious |
| Advantages | Uni-Directional Profit, Unlimited Gains | Generates Steady Income |
| Disadvantages | High Premium | Limited Profit, Unlimited Risk |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | NA | NA |
| More Comparisons | Long Straddle Vs Short Put | Covered Call Vs Short Put |
| Long Straddle Vs Long Combo | Covered Call Vs Long Combo | |
| Long Straddle Vs Synthetic Call | Covered Call Vs Synthetic Call | |
| Long Straddle Vs Long Put | Covered Call Vs Short Call | |
| Long Straddle Vs Long Call | Covered Call Vs Long Call | |
| Long Straddle Vs Covered Call | Covered Call Vs Long Put | |
| Long Straddle Vs Covered Put | Covered Call Vs Covered Put | |
| Long Straddle Vs Protective Call | Covered Call Vs Protective Call | |
| Long Straddle Vs Short Box | Covered Call Vs Short Box | |
| Long Straddle Vs Long Call Condor | Covered Call Vs Long Call Condor | |
| Long Straddle Vs Short Call Condor | Covered Call Vs Short Call Condor | |
| Long Straddle Vs Box Spread | Covered Call Vs Box Spread | |
| Long Straddle Vs Short Strangle | Covered Call Vs Short Strangle | |
| Long Straddle Vs Long Strangle | Covered Call Vs Long Strangle | |
| Long Straddle Vs Collar Strategy | Covered Call Vs Collar Strategy | |
| Long Straddle Vs Short Call | Covered Call Vs Long Straddle | |
| Long Straddle Vs Short Straddle | Covered Call Vs Short Straddle | |
| Long Straddle Vs Long Call Butterfly | Covered Call Vs Long Call Butterfly | |
| Long Straddle Vs Short Call Butterfly | Covered Call Vs Short Call Butterfly | |
| Long Straddle Vs Bear Call Spread | Covered Call Vs Bear Call Spread | |
| Long Straddle Vs Bear Put Spread | Covered Call Vs Bear Put Spread | |
| Long Straddle Vs Bull Put Spread | Covered Call Vs Bull Put Spread | |
| Long Straddle Vs Bull Put Spread | Covered Call Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Covered Call Vs Long Straddle option strategies.
At the same time, if you are in a neutral market situation and are looking for unlimited profits from your share market trades, then you can opt to go for the Long Straddle strategy.
There is a limited amount of risk involved as well, however, there are good chances of high profits if the strategy is executed well.
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.
