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 Put Vs Covered 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 Short Put Vs Covered 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 Short Put Vs Covered Call comparison:
| Comparison Aspect | Short Put | Covered Call |
| View |  |  |
| Strategy Introduction | The short put strategy is used when the investor is bullish towards the market and expects the prices to go up. He then sells the put option and makes a profit if...more | In a Covered Call Strategy, the trader holds a long position in a security and at the same time, he writes the call options on the same security to generate income through premiums...more |
| Investor Obligation | Investor is obligated to sell the shares at the predetermined price, at the time of expiry, if the buyer of the put option chooses to exercise his option. | Pay the difference as a loss in case the stock value falls beyond the investor set price. |
| Market Position | Bullish | Moderately Bullish or Neutral |
| Strategy Level Suitable for | Beginners | Beginners |
| Options Traded | Put | Call |
| Number of Positions | 1 | 2 (Underlying & Call) |
| Action Needed | Sell Put Option | Sell Call Option |
| Risk for You | Unlimited | Unlimited |
| Profit Potential | Limited | Limited |
| Break Even Point for Investor | Strike Price MINUS Premium | Strike Price MINUS Premium |
| Investor Intention | Let Options Expire Worthlessly | Make Money from Premium Received |
| Investor Expectation | Prices go up sharply | Limited Price Movements |
| Strategy Summary | Complex & Risky | Cautious |
| Advantages | Steady source of income till market remains bullish | Generates Steady Income |
| Disadvantages | High Risk, Limited Profit | Limited Profit, Unlimited Risk |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 2 | 1 |
| Also called as | Naked Put or Uncovered Put | NA |
| More Comparisons | Short Put Vs Long Put | Covered Call Vs Short Put |
| Short Put Vs Long Combo | Covered Call Vs Long Combo | |
| Short Put Vs Synthetic Call | Covered Call Vs Synthetic Call | |
| Short Put Vs Short Call | Covered Call Vs Short Call | |
| Short Put Vs Long Call | Covered Call Vs Long Call | |
| Short Put Vs Covered Call | Covered Call Vs Long Put | |
| Short Put Vs Covered Put | Covered Call Vs Covered Put | |
| Short Put Vs Protective Call | Covered Call Vs Protective Call | |
| Short Put Vs Short Box | Covered Call Vs Short Box | |
| Short Put Vs Long Call Condor | Covered Call Vs Long Call Condor | |
| Short Put Vs Short Call Condor | Covered Call Vs Short Call Condor | |
| Short Put Vs Box Spread | Covered Call Vs Box Spread | |
| Short Put Vs Short Strangle | Covered Call Vs Short Strangle | |
| Short Put Vs Long Strangle | Covered Call Vs Long Strangle | |
| Short Put Vs Collar Strategy | Covered Call Vs Collar Strategy | |
| Short Put Vs Long Straddle | Covered Call Vs Long Straddle | |
| Short Put Vs Short Straddle | Covered Call Vs Short Straddle | |
| Short Put Vs Long Call Butterfly | Covered Call Vs Long Call Butterfly | |
| Short Put Vs Short Call Butterfly | Covered Call Vs Short Call Butterfly | |
| Short Put Vs Bear Call Spread | Covered Call Vs Bear Call Spread | |
| Short Put Vs Bear Put Spread | Covered Call Vs Bear Put Spread | |
| Short Put Vs Bull Call Spread | Covered Call Vs Bull Put Spread | |
| Short Put Vs Bull Put Spread | Covered Call Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Short Put Vs Covered Call option strategies.
However, if the market is moderately bullish or neutral with a high-risk appetite with a limitation on the profit – then you can opt for a covered call option strategy.
However, if your risk appetite is relatively high – then you can try Short Put although the profit potential in that strategy is limited.
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.
