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 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 Put 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 Put Vs Short Strangle comparison:
| Comparison Aspect | Short Strangle | Covered Put |
| 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 | 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 | If the prediction does not come out true, the strategy can cause unlimited loss. | 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 | Experts | Experts |
| Options Traded | Call | Put |
| Number of Positions | 4 | 2 |
| Action Needed | 1 Short ITM Call, 1 Long ITM Call, 1 Long OTM Call, 1 Short OTM Call | Short on Underlying and Short Put |
| 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 | Futures Price + Premium Received |
| Investor Intention | Stock price remains between the 2 option Strike Prices and the options expire worthlessly | Let Options Expire Worthlessly |
| Investor Expectation | Little or No Market Volatility | Prices of Assets Go Down Slightly |
| Strategy Summary | Profits in Stable Market | Steady Profits with Caution |
| Advantages | Higher Range of Profit | Income Generation, Reduced Losses |
| Disadvantages | Low Premium, Unlimited Risk | Unlimited Risk in specific situations |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | Credit Spread | Married Put |
| More Comparisons | Short Strangle Vs Short Put | Covered Put Vs Short Put |
| Short Strangle Vs Long Combo | Covered Put Vs Long Combo | |
| Short Strangle Vs Synthetic Call | Covered Put Vs Synthetic Call | |
| Short Strangle Vs Long Put | Covered Put Vs Long Put | |
| Short Strangle Vs Long Call | Covered Put Vs Long Call | |
| Short Strangle Vs Covered Call | Covered Put Vs Covered Call | |
| Short Strangle Vs Covered Put | Covered Put Vs Short Call | |
| Short Strangle Vs Protective Call | Covered Put Vs Protective Call | |
| Short Strangle Vs Short Box | Covered Put Vs Short Box | |
| Short Strangle Vs Long Call Condor | Covered Put Vs Long Call Condor | |
| Short Strangle Vs Short Call Condor | Covered Put Vs Short Call Condor | |
| Short Strangle Vs Box Spread | Covered Put Vs Box Spread | |
| Short Strangle Vs Short Call | Covered Put Vs Short Strangle | |
| Short Strangle Vs Long Strangle | Covered Put Vs Long Strangle | |
| Short Strangle Vs Collar Strategy | Covered Put Vs Collar Strategy | |
| Short Strangle Vs Long Straddle | Covered Put Vs Long Straddle | |
| Short Strangle Vs Short Straddle | Covered Put Vs Short Straddle | |
| Short Strangle Vs Long Call Butterfly | Covered Put Vs Long Call Butterfly | |
| Short Strangle Vs Short Call Butterfly | Covered Put Vs Short Call Butterfly | |
| Short Strangle Vs Bear Call Spread | Covered Put Vs Bear Call Spread | |
| Short Strangle Vs Bear Put Spread | Covered Put Vs Bear Put Spread | |
| Short Strangle Vs Bull Call Spread | Covered Put Vs Bull Call Spread | |
| Short Strangle Vs Bull Put Spread | Covered Put Vs Bull Put Spread |
Thus, with this, we wrap up our comparison of Covered Put 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.
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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