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 Straddle Vs Protective 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 Straddle Vs Protective 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 Straddle Vs Protective Call comparison:
| Comparison Aspect | Protective Call | Short Straddle |
| View |  |  |
| Strategy Introduction | A Protective call combines an existing short position on an underlying asset with buying of call options, to safeguard against the price rise against the expectations...more | Using the short straddle strategy, the investor makes an upfront gain through the premiums collected by writing the call and put options. The investor expects that there...more |
| Investor Obligation | Protective call works as a protection against the price reversal and is like an insurance policy | The investor must hold strong views of the steadiness in the market to be involved in the short straddle. |
| Market Position | Bearish | Neutral |
| Strategy Level Suitable for | Intermediates | Experts |
| Options Traded | Call | Call, Put |
| Number of Positions | 2 | 2 |
| Action Needed | Short Position on Buy Call Option | 1 ATM Call, 1 ATM Put |
| Risk for You | Limited | Unlimited |
| Profit Potential | Unlimited | Limited |
| Break Even Point for Investor | Underlying Price - Call Premium | Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call+ Net Premium |
| Investor Intention | Protect himself from extra losses if Price goes Up | Let Options Expire Worthlessly |
| Investor Expectation | Market Prices to Go Down | No Market Movement |
| Strategy Summary | Experience Helps | Complex |
| Advantages | Unlimited Profit, limited Risk | Profits in Zero Market Volatility Situation |
| Disadvantages | Reduced Profits due to the Premium paid for Call Option. | Limited Profit, Unlimited Risk |
| Market Scenarios - Profit | 1 | 1 |
| Market Scenarios - Loss | 1 | 2 |
| Also called as | Synthetic Long Put | NA |
| More Comparisons | Protective Call Vs Short Put | |
| Protective Call Vs Long Combo | ||
| Protective Call Vs Synthetic Call | ||
| Protective Call Vs Long Put | ||
| Protective Call Vs Long Call | ||
| Protective Call Vs Covered Call | ||
| Protective Call Vs Covered Put | ||
| Protective Call Vs Short Call | ||
| Protective Call Vs Short Box | ||
| Protective Call Vs Long Call Condor | ||
| Protective Call Vs Short Call Condor | ||
| Protective Call Vs Box Spread | ||
| Protective Call Vs Short Strangle | ||
| Protective Call Vs Long Strangle | ||
| Protective Call Vs Collar Strategy | ||
| Protective Call Vs Long Straddle | ||
| Protective Call Vs Short Straddle | ||
| Protective Call Vs Long Call Butterfly | ||
| Protective Call Vs Short Call Butterfly | ||
| Protective Call Vs Bear Call Spread | ||
| Protective Call Vs Bear Put Spread | ||
| Protective Call Vs Bull Call Spread | ||
| Protective Call Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Short Straddle Vs Protective Call option strategies.
At the same time, if you are an experienced trader and are in a neutral market situation, then Short Straddle is one of the options you can look out for.
There is a high amount of risk involved as well – thus, you have to be very sure of the point that the market has no volatility. Otherwise, stakes can be very high.
However, if you are looking at a bearish market momentum and want to take a limited risk with an eye on unlimited profits, then the protective call is the strategy you must be using.
Furthermore, as told above, it also depends on the market situation.
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