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 Put 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 Put 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 Put comparison:
| Comparison Aspect | Short Put | Covered Put |
| 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 | 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 | 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. | 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 | Bullish | Neutral or Slightly Bearish |
| Strategy Level Suitable for | Beginners | Experts |
| Options Traded | Put | Put |
| Number of Positions | 1 | 2 |
| Action Needed | Sell Put Option | Short on Underlying and Short Put |
| Risk for You | Unlimited | Unlimited |
| Profit Potential | Limited | Limited |
| Break Even Point for Investor | Strike Price MINUS Premium | Futures Price + Premium Received |
| Investor Intention | Let Options Expire Worthlessly | Let Options Expire Worthlessly |
| Investor Expectation | Prices go up sharply | Prices of Assets Go Down Slightly |
| Strategy Summary | Complex & Risky | Steady Profits with Caution |
| Advantages | Steady source of income till market remains bullish | Income Generation, Reduced Losses |
| Disadvantages | High Risk, Limited Profit | Unlimited Risk in specific situations |
| Market Scenarios - Profit | 1 | 2 |
| Market Scenarios - Loss | 2 | 1 |
| Also called as | Naked Put or Uncovered Put | Married Put |
| More Comparisons | Short Put Vs Long Put | Covered Put Vs Short Put |
| Short Put Vs Long Combo | Covered Put Vs Long Combo | |
| Short Put Vs Synthetic Call | Covered Put Vs Synthetic Call | |
| Short Put Vs Short Call | Covered Put Vs Long Put | |
| Short Put Vs Long Call | Covered Put Vs Long Call | |
| Short Put Vs Covered Call | Covered Put Vs Covered Call | |
| Short Put Vs Covered Put | Covered Put Vs Short Call | |
| Short Put Vs Protective Call | Covered Put Vs Protective Call | |
| Short Put Vs Short Box | Covered Put Vs Short Box | |
| Short Put Vs Long Call Condor | Covered Put Vs Long Call Condor | |
| Short Put Vs Short Call Condor | Covered Put Vs Short Call Condor | |
| Short Put Vs Box Spread | Covered Put Vs Box Spread | |
| Short Put Vs Short Strangle | Covered Put Vs Short Strangle | |
| Short Put Vs Long Strangle | Covered Put Vs Long Strangle | |
| Short Put Vs Collar Strategy | Covered Put Vs Collar Strategy | |
| Short Put Vs Long Straddle | Covered Put Vs Long Straddle | |
| Short Put Vs Short Straddle | Covered Put Vs Short Straddle | |
| Short Put Vs Long Call Butterfly | Covered Put Vs Long Call Butterfly | |
| Short Put Vs Short Call Butterfly | Covered Put Vs Short Call Butterfly | |
| Short Put Vs Bear Call Spread | Covered Put Vs Bear Call Spread | |
| Short Put Vs Bear Put Spread | Covered Put Vs Bear Put Spread | |
| Short Put Vs Bull Call Spread | Covered Put Vs Bull Call Spread | |
| Short Put Vs Bull Put Spread | Covered Put Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Short Put Vs Covered Put option strategies.
At the same time, 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 you trading style.
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.
