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 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 Short 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 Short Put Vs Short Call Butterfly comparison:
| Comparison Aspect | Short Put | Short Call Butterfly |
| 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 | 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 | 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. | 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 | Bullish | Neutral |
| Strategy Level Suitable for | Beginners | Intermediates |
| Options Traded | Put | Call |
| Number of Positions | 1 | 4 |
| Action Needed | Sell Put Option | 2 ATM, 1 ITM, 1 OTM Calls |
| Risk for You | Unlimited | Limited |
| Profit Potential | Limited | 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 go up sharply | High Market Volatility |
| Strategy Summary | Complex & Risky | Profit in Unsure Market Situations |
| Advantages | Steady source of income till market remains bullish | Limited Exposure, Low Investment |
| Disadvantages | High Risk, Limited Profit | Low Returns, Requires Significant Market Movement |
| Market Scenarios - Profit | 1 | 1 |
| Market Scenarios - Loss | 2 | 1 |
| Also called as | Naked Put or Uncovered Put | NA |
| More Comparisons | Short Put Vs Long Put | Short Call Butterfly Vs Short Put |
| Short Put Vs Long Combo | Short Call Butterfly Vs Long Combo | |
| Short Put Vs Synthetic Call | Short Call Butterfly Vs Synthetic Call | |
| Short Put Vs Short Call | Short Call Butterfly Vs Long Put | |
| Short Put Vs Long Call | Short Call Butterfly Vs Long Call | |
| Short Put Vs Covered Call | Short Call Butterfly Vs Covered Call | |
| Short Put Vs Covered Put | Short Call Butterfly Vs Covered Put | |
| Short Put Vs Protective Call | Short Call Butterfly Vs Protective Call | |
| Short Put Vs Short Box | Short Call Butterfly Vs Short Box | |
| Short Put Vs Long Call Condor | Short Call Butterfly Vs Long Call Condor | |
| Short Put Vs Short Call Condor | Short Call Butterfly Vs Short Call Condor | |
| Short Put Vs Box Spread | Short Call Butterfly Vs Box Spread | |
| Short Put Vs Short Strangle | Short Call Butterfly Vs Short Strangle | |
| Short Put Vs Long Strangle | Short Call Butterfly Vs Long Strangle | |
| Short Put Vs Collar Strategy | Short Call Butterfly Vs Collar Strategy | |
| Short Put Vs Long Straddle | Short Call Butterfly Vs Long Straddle | |
| Short Put Vs Short Straddle | Short Call Butterfly Vs Short Straddle | |
| Short Put Vs Long Call Butterfly | Short Call Butterfly Vs Long Call Butterfly | |
| Short Put Vs Short Call Butterfly | Short Call Butterfly Vs Short Call | |
| Short Put Vs Bear Call Spread | Short Call Butterfly Vs Bear Call Spread | |
| Short Put Vs Bear Put Spread | Short Call Butterfly Vs Bear Put Spread | |
| Short Put Vs Bull Call Spread | Short Call Butterfly Vs Bull Call Spread | |
| Short Put Vs Bull Put Spread | Short Call Butterfly Vs Bull Put Spread |
Thus, with this, we wrap up our comparison on Short Put Vs Short Call Butterfly option strategies.
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.
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.
