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 Short Call Butterfly Vs Long 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 Short Call Butterfly Vs Long 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 Short Call Butterfly Vs Long Call Butterfly comparison:
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
Long Call Butterfly is the options trading strategy which is used when the trader has a neutral outlook towards the market and expects the prices to remain range-bound...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.
Create Bull Spread when High Market Expectations, Create Bear Spread when Low Market Expectations.
Market Position
Neutral
Neutral
Strategy Level Suitable for
Intermediates
Intermediates
Options Traded
Call
Call
Number of Positions
4
4
Action Needed
2 ATM, 1 ITM, 1 OTM Calls
2 ATM, 1 ITM, 1 OTM Calls
Risk for You
Limited
Limited
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
Lower Break-even = Lower Strike Price + Net Premium Upper Break-even = Higher Strike Price - Net Premium
Investor Intention
Let Options Expire Worthlessly
Options expire worthless except the one with the lower strike price
Thus, with this, we wrap up our comparison on Short Call Butterfly Vs Long Call Butterfly option strategies.
Furthermore, 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, if you are in a neutral market situation and want to take a limited risk, then Long Call Butterfly is one of the options trading strategies you can look out for.
The profit you get using this strategy is also limited in scope.
The strategy comes with a limited profit potential.
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