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 Short Call Butterfly 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 Short Call Butterfly 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 Short Call Butterfly comparison:
| Comparison Aspect | Short Call Butterfly | Covered Call |
| View |  |  |
| Strategy Introduction | Short Call Butterfly is the options strategy which is used when the trader expects a lot of volatility in the market. It is the opposite of the long call butterfly, in which the investor expects...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 | It is necessary that the strike prices of the in-the-money and out-of-the-money call options are equidistant from the at-the-money call options, and all the options have the same expiration date. | 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 | Intermediates | Beginners |
| Options Traded | Call | Call |
| Number of Positions | 4 | 2 (Underlying & Call) |
| Action Needed | 2 ATM, 1 ITM, 1 OTM Calls | Sell Call Option |
| Risk for You | Limited | Unlimited |
| Profit Potential | Limited | Limited |
| Break Even Point for Investor | Lower Break-even = Lower Strike Price + Net Premium Upper Break-even = Higher Strike Price - Net Premium | Strike Price MINUS Premium |
| Investor Intention | Let Options Expire Worthlessly | Make Money from Premium Received |
| Investor Expectation | High Market Volatility | Limited Price Movements |
| Strategy Summary | Profit in Unsure Market Situations | Cautious |
| Advantages | Limited Exposure, Low Investment | Generates Steady Income |
| Disadvantages | Low Returns, Requires Significant Market Movement | Limited Profit, Unlimited Risk |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | NA | NA |
| More Comparisons | Short Call Butterfly Vs Short Put | Covered Call Vs Short Put |
| Short Call Butterfly Vs Long Combo | Covered Call Vs Long Combo | |
| Short Call Butterfly Vs Synthetic Call | Covered Call Vs Synthetic Call | |
| Short Call Butterfly Vs Long Put | Covered Call Vs Short Call | |
| Short Call Butterfly Vs Long Call | Covered Call Vs Long Call | |
| Short Call Butterfly Vs Covered Call | Covered Call Vs Long Put | |
| Short Call Butterfly Vs Covered Put | Covered Call Vs Covered Put | |
| Short Call Butterfly Vs Protective Call | Covered Call Vs Protective Call | |
| Short Call Butterfly Vs Short Box | Covered Call Vs Short Box | |
| Short Call Butterfly Vs Long Call Condor | Covered Call Vs Long Call Condor | |
| Short Call Butterfly Vs Short Call Condor | Covered Call Vs Short Call Condor | |
| Short Call Butterfly Vs Box Spread | Covered Call Vs Box Spread | |
| Short Call Butterfly Vs Short Strangle | Covered Call Vs Short Strangle | |
| Short Call Butterfly Vs Long Strangle | Covered Call Vs Long Strangle | |
| Short Call Butterfly Vs Collar Strategy | Covered Call Vs Collar Strategy | |
| Short Call Butterfly Vs Long Straddle | Covered Call Vs Long Straddle | |
| Short Call Butterfly Vs Short Straddle | Covered Call Vs Short Straddle | |
| Short Call Butterfly Vs Long Call Butterfly | Covered Call Vs Long Call Butterfly | |
| Short Call Butterfly Vs Short Call | Covered Call Vs Short Call Butterfly | |
| Short Call Butterfly Vs Bear Call Spread | Covered Call Vs Bear Call Spread | |
| Short Call Butterfly Vs Bear Put Spread | Covered Call Vs Bear Put Spread | |
| Short Call Butterfly Vs Bull Call Spread | Covered Call Vs Bull Put Spread | |
| Short Call Butterfly Vs Bull Put Spread | Covered Call Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Covered Call Vs Short Call Butterfly option strategies.
At the same time, if you as a trader are expecting price movement (without any idea of the direction) within a neutral market momentum – then short call butterfly is an optimal strategy for you.
There is a limited amount of risk involved and you can expect limited profit only in this options strategy.
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.
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