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 Put Vs Protective Call 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 Put Vs Protective Call 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 Put Vs Protective Call comparison:
| Comparison Aspect | Protective Call | Covered Put |
| View |  |  |
| Strategy Introduction | A Protective call combines an existing short position on an underlying asset with buying of call options, to safeguard against the price rise against the expectations...more | Covered Put is the options trading strategy which involves shorting the underlying asset, along with selling a put option on the same number of shares. By doing this, the trader is able to...more |
| Investor Obligation | Protective call works as a protection against the price reversal and is like an insurance policy | If the price of the stock goes below the strike price of the put option, the put option will be expired and will have to be brought back. |
| Market Position | Bearish | Neutral or Slightly Bearish |
| Strategy Level Suitable for | Intermediates | Experts |
| Options Traded | Call | Put |
| Number of Positions | 2 | 2 |
| Action Needed | Short Position on Buy Call Option | Short on Underlying and Short Put |
| Risk for You | Limited | Unlimited |
| Profit Potential | Unlimited | Limited |
| Break Even Point for Investor | Underlying Price - Call Premium | Futures Price + Premium Received |
| Investor Intention | Protect himself from extra losses if Price goes Up | Let Options Expire Worthlessly |
| Investor Expectation | Market Prices to Go Down | Prices of Assets Go Down Slightly |
| Strategy Summary | Experience Helps | Steady Profits with Caution |
| Advantages | Unlimited Profit, limited Risk | Income Generation, Reduced Losses |
| Disadvantages | Reduced Profits due to the Premium paid for Call Option. | Unlimited Risk in specific situations |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | Synthetic Long Put | Married Put |
| More Comparisons | Protective Call Vs Short Put | Covered Put Vs Short Put |
| Protective Call Vs Long Combo | Covered Put Vs Long Combo | |
| Protective Call Vs Synthetic Call | Covered Put Vs Synthetic Call | |
| Protective Call Vs Long Put | Covered Put Vs Long Put | |
| Protective Call Vs Long Call | Covered Put Vs Long Call | |
| Protective Call Vs Covered Call | Covered Put Vs Covered Call | |
| Protective Call Vs Covered Put | Covered Put Vs Short Call | |
| Protective Call Vs Short Call | Covered Put Vs Protective Call | |
| Protective Call Vs Short Box | Covered Put Vs Short Box | |
| Protective Call Vs Long Call Condor | Covered Put Vs Long Call Condor | |
| Protective Call Vs Short Call Condor | Covered Put Vs Short Call Condor | |
| Protective Call Vs Box Spread | Covered Put Vs Box Spread | |
| Protective Call Vs Short Strangle | Covered Put Vs Short Strangle | |
| Protective Call Vs Long Strangle | Covered Put Vs Long Strangle | |
| Protective Call Vs Collar Strategy | Covered Put Vs Collar Strategy | |
| Protective Call Vs Long Straddle | Covered Put Vs Long Straddle | |
| Protective Call Vs Short Straddle | Covered Put Vs Short Straddle | |
| Protective Call Vs Long Call Butterfly | Covered Put Vs Long Call Butterfly | |
| Protective Call Vs Short Call Butterfly | Covered Put Vs Short Call Butterfly | |
| Protective Call Vs Bear Call Spread | Covered Put Vs Bear Call Spread | |
| Protective Call Vs Bear Put Spread | Covered Put Vs Bear Put Spread | |
| Protective Call Vs Bull Call Spread | Covered Put Vs Bull Call Spread | |
| Protective Call Vs Bull Put Spread | Covered Put Vs Bull Put Spread |
Thus, with this, we wrap up our comparison of Covered Put Vs Protective Call option strategies.
At the same time, if you are looking at a bearish market momentum and want to take a limited risk with an eye on unlimited profits, then the protective call is the strategy you must be using.
If you are looking at a bearish market momentum and are open towards high risk with consistent but limited profits, then Covered Put is suitable for your trading style.
Furthermore, as told above, it also depends on the market situation.
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