Bear Call Spread Vs Short Straddle (Sell Straddle or Naked Straddle) Options Trading Strategy Comparison

Compare Bear Call Spread and Short Straddle (Sell Straddle or Naked Straddle) options trading strategies. Find similarities and differences between Bear Call Spread and Short Straddle (Sell Straddle or Naked Straddle) strategies. Find the best options trading strategy for your trading needs.

Bear Call Spread Vs Short Straddle (Sell Straddle or Naked Straddle)

	Bear Call Spread	Short Straddle (Sell Straddle or Naked Straddle)


About Strategy	A Bear Call Spread strategy involves buying a Call Option while simultaneously selling a Call Option of lower strike price on same underlying asset and expiry date. You receive a premium for selling a Call Option and pay a premium for buying a Call Option. So your cost of investment is much lower. The strategy is less risky with the reward limited to the difference in premium received and paid. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear call credit spread as a net credit is received upon entering the trade. The risk and reward both are limited in the strategy. How to use the bear call spread options strategy? The bear call spr... Read More	The Short Straddle (or Sell Straddle or naked Straddle) is a neutral options strategy. This strategy involves simultaneously selling a call and a put option of the same underlying asset, same strike price and same expire date. A Short Straddle strategy is used in case of little volatility market scenarios wherein you expect none or very little movement in the price of the underlying. Such scenarios arise when there is no major news expected until expire. This is a limited profit and unlimited loss strategy. The maximum profit earned when, on expire date, the underlying asset is trading at the strike price at which the options are sold. The maximum loss is unlimited and occurs when underlying asset price moves sharply in upward or down... Read More
Market View	Bearish	Neutral
Strategy Level	Beginners	Advance
Options Type	Call	Call + Put
Number of Positions	2	2
Risk Profile	Limited	Unlimited
Reward Profile	Limited	Limited
Breakeven Point	Strike Price of Short Call + Net Premium Received	2 Breakeven Points

When and how to use Bear Call Spread and Short Straddle (Sell Straddle or Naked Straddle)?

	Bear Call Spread	Short Straddle (Sell Straddle or Naked Straddle)
When to use?	The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.	This strategy is to be used when you expect a flat market in the coming days with very less movement in the prices of underlying asset.
Market View	Bearish When you are expecting the price of the underlying to moderately go down.	Neutral When trader don't expect much movement in its price in near future.
Action	Buy OTM Call Option Sell ITM Call Option Let's assume you're Bearish on Nifty and are expecting mild drop in the price. You can deploy Bear Call strategy by selling a Call Option with lower strike and buying a Call Option with higher strike. You will receive a higher premium for selling a Call while pay lower premium for buying a Call. The net premium will be your profit. If the price of Nifty rises, your loss will be limited to difference between two strike prices minus net premium.	Sell Call Option Sell Put Option
Breakeven Point	Strike Price of Short Call + Net Premium Received The break even point is achieved when the price of the underlying is equal to strike price of the short Call plus net premium received.	2 Breakeven Points There are 2 break even points in this strategy. The upper break even is hit when the underlying price is equal to the total of strike price of short call and net premium paid. The lower break even is hit when the underlying price is equal to the difference between strike price of short Put and net premium paid. Break-even points: Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call+ Net Premium

Compare Risks and Rewards (Bear Call Spread Vs Short Straddle (Sell Straddle or Naked Straddle))

	Bear Call Spread	Short Straddle (Sell Straddle or Naked Straddle)
Risks	Limited The maximum loss occurs when the price of the underlying moves above the strike price of long Call. Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received	Unlimited There is a possibility of unlimited loss in the short straddle strategy. The loss occurs when the price of the underlying significantly moves upwards and downwards. Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received Or Loss= Strike Price of Short Put - Price of Underlying - Net Premium Received
Rewards	Limited The maximum profit the net premium received. It occurs when the price of the underlying is greater than strike price of short Call Option. Max Profit = Net Premium Received - Commissions Paid	Limited Maximum profit is limited to the net premium received. The profit is achieved when the price of the underlying is equal to either strike price of short Call or Put.
Maximum Profit Scenario	Underlying goes down and both options not exercised	Both Option not exercised
Maximum Loss Scenario	Underlying goes up and both options exercised	One Option exercised

Pros & Cons or Bear Call Spread and Short Straddle (Sell Straddle or Naked Straddle)

	Bear Call Spread	Short Straddle (Sell Straddle or Naked Straddle)
Advantages	It allows you to profit in a flat market scenario when you're expecting the underlying to mildly drop, be range bound or marginally rise.	It allows you to benefit from double time decay and earn profit in a less volatile scenario.
Disadvantage	Limited profit potential.	Unlimited losses if the price of the underlying move significantly in either direction.
Simillar Strategies	Bear Put Spread, Bull Call Spread	Short Strangle, Long Straddle

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