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 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 Put 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 Put Vs Short Call Butterfly comparison:
| Comparison Aspect | Short Call Butterfly | Covered Put |
| 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 | 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 | 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. | 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 | Neutral | Neutral or Slightly Bearish |
| Strategy Level Suitable for | Intermediates | Experts |
| Options Traded | Call | Put |
| Number of Positions | 4 | 2 |
| Action Needed | 2 ATM, 1 ITM, 1 OTM Calls | Short on Underlying and Short Put |
| 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 | Futures Price + Premium Received |
| Investor Intention | Let Options Expire Worthlessly | Let Options Expire Worthlessly |
| Investor Expectation | High Market Volatility | Prices of Assets Go Down Slightly |
| Strategy Summary | Profit in Unsure Market Situations | Steady Profits with Caution |
| Advantages | Limited Exposure, Low Investment | Income Generation, Reduced Losses |
| Disadvantages | Low Returns, Requires Significant Market Movement | Unlimited Risk in specific situations |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | NA | Married Put |
| More Comparisons | Short Call Butterfly Vs Short Put | Covered Put Vs Short Put |
| Short Call Butterfly Vs Long Combo | Covered Put Vs Long Combo | |
| Short Call Butterfly Vs Synthetic Call | Covered Put Vs Synthetic Call | |
| Short Call Butterfly Vs Long Put | Covered Put Vs Long Put | |
| Short Call Butterfly Vs Long Call | Covered Put Vs Long Call | |
| Short Call Butterfly Vs Covered Call | Covered Put Vs Covered Call | |
| Short Call Butterfly Vs Covered Put | Covered Put Vs Short Call | |
| Short Call Butterfly Vs Protective Call | Covered Put Vs Protective Call | |
| Short Call Butterfly Vs Short Box | Covered Put Vs Short Box | |
| Short Call Butterfly Vs Long Call Condor | Covered Put Vs Long Call Condor | |
| Short Call Butterfly Vs Short Call Condor | Covered Put Vs Short Call Condor | |
| Short Call Butterfly Vs Box Spread | Covered Put Vs Box Spread | |
| Short Call Butterfly Vs Short Strangle | Covered Put Vs Short Strangle | |
| Short Call Butterfly Vs Long Strangle | Covered Put Vs Long Strangle | |
| Short Call Butterfly Vs Collar Strategy | Covered Put Vs Collar Strategy | |
| Short Call Butterfly Vs Long Straddle | Covered Put Vs Long Straddle | |
| Short Call Butterfly Vs Short Straddle | Covered Put Vs Short Straddle | |
| Short Call Butterfly Vs Long Call Butterfly | Covered Put Vs Long Call Butterfly | |
| Short Call Butterfly Vs Short Call | Covered Put Vs Short Call Butterfly | |
| Short Call Butterfly Vs Bear Call Spread | Covered Put Vs Bear Call Spread | |
| Short Call Butterfly Vs Bear Put Spread | Covered Put Vs Bear Put Spread | |
| Short Call Butterfly Vs Bull Call Spread | Covered Put Vs Bull Call Spread | |
| Short Call Butterfly Vs Bull Put Spread | Covered Put Vs Bull Put Spread |
Thus, with this, we wrap up our comparison of Covered Put 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.
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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