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 Strangle 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 Strangle 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 Strangle comparison:
| Comparison Aspect | Short Strangle | Covered Call |
| View |  |  |
| Strategy Introduction | The short strangle options trading strategy is an excellent strategy to be deployed when the investor is expecting little to no volatility in the market...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 | If the prediction does not come out true, the strategy can cause unlimited loss. | 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 | Experts | Beginners |
| Options Traded | Call | Call |
| Number of Positions | 4 | 2 (Underlying & Call) |
| Action Needed | 1 Short ITM Call, 1 Long ITM Call, 1 Long OTM Call, 1 Short OTM Call | Sell Call Option |
| Risk for You | Limited | Unlimited |
| Profit Potential | Unlimited | Limited |
| Break Even Point for Investor | Lower Breakeven = Lower Strike Price + Net Premium Upper breakeven = Higher Strike Price - Net Premium | Strike Price MINUS Premium |
| Investor Intention | Stock price remains between the 2 option Strike Prices and the options expire worthlessly | Make Money from Premium Received |
| Investor Expectation | Little or No Market Volatility | Limited Price Movements |
| Strategy Summary | Profits in Stable Market | Cautious |
| Advantages | Higher Range of Profit | Generates Steady Income |
| Disadvantages | Low Premium, Unlimited Risk | Limited Profit, Unlimited Risk |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | Credit Spread | NA |
| More Comparisons | Short Strangle Vs Short Put | Covered Call Vs Short Put |
| Short Strangle Vs Long Combo | Covered Call Vs Long Combo | |
| Short Strangle Vs Synthetic Call | Covered Call Vs Synthetic Call | |
| Short Strangle Vs Long Put | Covered Call Vs Short Call | |
| Short Strangle Vs Long Call | Covered Call Vs Long Call | |
| Short Strangle Vs Covered Call | Covered Call Vs Long Put | |
| Short Strangle Vs Covered Put | Covered Call Vs Covered Put | |
| Short Strangle Vs Protective Call | Covered Call Vs Protective Call | |
| Short Strangle Vs Short Box | Covered Call Vs Short Box | |
| Short Strangle Vs Long Call Condor | Covered Call Vs Long Call Condor | |
| Short Strangle Vs Short Call Condor | Covered Call Vs Short Call Condor | |
| Short Strangle Vs Box Spread | Covered Call Vs Box Spread | |
| Short Strangle Vs Short Call | Covered Call Vs Short Strangle | |
| Short Strangle Vs Long Strangle | Covered Call Vs Long Strangle | |
| Short Strangle Vs Collar Strategy | Covered Call Vs Collar Strategy | |
| Short Strangle Vs Long Straddle | Covered Call Vs Long Straddle | |
| Short Strangle Vs Short Straddle | Covered Call Vs Short Straddle | |
| Short Strangle Vs Long Call Butterfly | Covered Call Vs Long Call Butterfly | |
| Short Strangle Vs Short Call Butterfly | Covered Call Vs Short Call Butterfly | |
| Short Strangle Vs Bear Call Spread | Covered Call Vs Bear Call Spread | |
| Short Strangle Vs Bear Put Spread | Covered Call Vs Bear Put Spread | |
| Short Strangle Vs Bull Call Spread | Covered Call Vs Bull Put Spread | |
| Short Strangle Vs Bull Put Spread | Covered Call Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Covered Call Vs Short Strangle option strategies.
At the same time, if you are in a neutral market situation and have a limited risk appetite, then Short Strangle is a potential option strategy for you. Generally, this strategy is suitable when you are sure that there is going to be low or no market volatility at all.
The strategy comes with a limited profit potential.
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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