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 Long 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 Long 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 Long Put Vs Short Call Butterfly comparison:
| Comparison Aspect | Long Put | Short Call Butterfly |
| View |  |  |
| Strategy Introduction | Long Put is used when the trader has a bearish view on the market and expects the price of the asset to go down. He will then wait for the prices to go down and then exercise his option...more | 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 |
| Investor Obligation | The strategy gives the trader a right to buy the put option on expiry, but not the obligation. The trader may choose to buy the option or not. | 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. |
| Market Position | Bearish | Neutral |
| Strategy Level Suitable for | Beginners | Intermediates |
| Options Traded | Put | Call |
| Number of Positions | 1 | 4 |
| Action Needed | Buy Put Option | 2 ATM, 1 ITM, 1 OTM Calls |
| Risk for You | Limited | Limited |
| Profit Potential | Unlimited | Limited |
| Break Even Point for Investor | Strike Price MINUS Premium | Lower Break-even = Lower Strike Price + Net Premium Upper Break-even = Higher Strike Price - Net Premium |
| Investor Intention | Let Options Expire Worthlessly | Let Options Expire Worthlessly |
| Investor Expectation | Prices of Assets Go Down | High Market Volatility |
| Strategy Summary | Effective | Profit in Unsure Market Situations |
| Advantages | Unlimited Profits, Profits possible even in Bearish Market | Limited Exposure, Low Investment |
| Disadvantages | High Premium | Low Returns, Requires Significant Market Movement |
| Market Scenarios - Profit | 2 | 1 |
| Market Scenarios - Loss | 1 | 1 |
| Also called as | NA | NA |
| More Comparisons | Long Put Vs Short Put | Short Call Butterfly Vs Short Put |
| Long Put Vs Long Combo | Short Call Butterfly Vs Long Combo | |
| Long Put Vs Synthetic Call | Short Call Butterfly Vs Synthetic Call | |
| Long Put Vs Short Call | Short Call Butterfly Vs Long Put | |
| Long Put Vs Long Call | Short Call Butterfly Vs Long Call | |
| Long Put Vs Covered Call | Short Call Butterfly Vs Covered Call | |
| Long Put Vs Covered Put | Short Call Butterfly Vs Covered Put | |
| Long Put Vs Protective Call | Short Call Butterfly Vs Protective Call | |
| Long Put Vs Short Box | Short Call Butterfly Vs Short Box | |
| Long Put Vs Long Call Condor | Short Call Butterfly Vs Long Call Condor | |
| Long Put Vs Short Call Condor | Short Call Butterfly Vs Short Call Condor | |
| Long Put Vs Box Spread | Short Call Butterfly Vs Box Spread | |
| Long Put Vs Short Strangle | Short Call Butterfly Vs Short Strangle | |
| Long Put Vs Long Strangle | Short Call Butterfly Vs Long Strangle | |
| Long Put Vs Collar Strategy | Short Call Butterfly Vs Collar Strategy | |
| Long Put Vs Long Straddle | Short Call Butterfly Vs Long Straddle | |
| Long Put Vs Short Straddle | Short Call Butterfly Vs Short Straddle | |
| Long Put Vs Long Call Butterfly | Short Call Butterfly Vs Long Call Butterfly | |
| Long Put Vs Short Call Butterfly | Short Call Butterfly Vs Short Call | |
| Long Put Vs Bear Call Spread | Short Call Butterfly Vs Bear Call Spread | |
| Long Put Vs Bear Put Spread | Short Call Butterfly Vs Bear Put Spread | |
| Long Put Vs Bull Call Spread | Short Call Butterfly Vs Bull Call Spread | |
| Long Put Vs Bull Put Spread | Short Call Butterfly Vs Bull Put Spread |
Thus, with this, we wrap up our comparison of Long Put Vs Short Call Butterfly option strategies.
As mentioned above, if you are a beginner level trader and are looking for unlimited profits with limited risk – it makes sense for you to employ the Long Put Option Strategy. 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.
At the same time, be aware of all the related aspects (like the ones listed above) and then make a choice for yourself.
Furthermore, as said above, it also depends on the market situation.
In case you are looking to trade in options segment or share market in general, let us assist you in that. Just fill the form below and we will take you to the steps ahead.
