Zerodha (Trading Account)
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Zerodha (Trading Account)
FREE Equity Delivery and MF
Flat ₹20/trade Intra-day/F&O
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Compare Bull Call Spread and Long Straddle (Buy Straddle) options trading strategies. Find similarities and differences between Bull Call Spread and Long Straddle (Buy Straddle) strategies. Find the best options trading strategy for your trading needs.
| Bull Call Spread | Long Straddle (Buy Straddle) | |
|---|---|---|
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| About Strategy | A Bull Call Spread (or Bull Call Debit Spread) strategy is meant for investors who are moderately bullish of the market and are expecting mild rise in the price of underlying. The strategy involves taking two positions of buying a Call Option and selling of a Call Option. The risk and reward in this strategy is limited. A Bull Call Spread strategy involves Buy ITM Call Option and Sell OTM Call Option.For example, if you are of the view that NIFTY will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell Nifty Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised. | The Long Straddle (or Buy Straddle) is a neutral strategy. This strategy involves simultaneously buying a call and a put option of the same underlying asset, same strike price and same expire date. A Long Straddle strategy is used in case of highly volatile market scenarios wherein you expect a big movement in the price of the underlying but are not sure of the direction. Such scenarios arise when company declare results, budget, war-like situation etc. This is an unlimited profit and limited risk strategy. The profit earns in this strategy is unlimited. Higher volatility results in higher profits. The maximum loss is limited to the net premium paid. The max loss occurs when underlying asset price on expire remains at the strike price. ... Read More |
| Market View | Bullish | Neutral |
| Strategy Level | Beginners | Beginners |
| Options Type | Call | Call + Put |
| Number of Positions | 2 | 2 |
| Risk Profile | Limited | Limited |
| Reward Profile | Limited | Unlimited |
| Breakeven Point | Strike price of purchased call + net premium paid | 2 break-even points |
| Bull Call Spread | Long Straddle (Buy Straddle) | |
|---|---|---|
| When to use? | A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future. |
The strategy is perfect to use when there is market volatility expected due to results, elections, budget, policy change, war etc. |
| Market View | Bullish When you are expecting a moderate rise in the price of the underlying. |
Neutral When you are not sure on the direction the underlying would move but are expecting the rise in its volatility. |
| Action |
A Bull Call Spread strategy involves Buy ITM Call Option + Sell OTM Call Option. For example, if you are of the view that Nifty will rise moderately in near future then you can Buy NIFTY Call Option at ITM and Sell NIFTY 50 Call Option at OTM. You will earn massively when both of your Options are exercised and incur huge losses when both Options are not exercised. |
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| Breakeven Point | Strike price of purchased call + net premium paid |
2 break-even points A straddle has two break-even points. Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call + Net Premium |
| Bull Call Spread | Long Straddle (Buy Straddle) | |
|---|---|---|
| Risks | Limited The trade will result in a loss if the price of the underlying decreases at expiration. The maximum loss is limited to net premium paid. Max Loss = Net Premium Paid Max Loss happens when the strike price of Call is less than or equal to price of the underlying. |
Limited The maximum loss for long straddle strategy is limited to the net premium paid. It happens the price of underlying is equal to strike price of options. Maximum Loss = Net Premium Paid |
| Rewards | Limited Limited To The Difference Between Two Strike Prices Minus Net Premium Maximum profit happens when the price of the underlying rises above strike price of two Calls. The profit is limited to the difference between two strike prices minus net premium paid. Max Profit = (Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid |
Unlimited There is unlimited profit opportunity in this strategy irrespective of the direction of the underlying. Profit occurs when the price of the underlying is greater than strike price of long Put or lesser than strike price of long Call. |
| Maximum Profit Scenario | Both options exercised |
Max profit is achieved when at one option is exercised. |
| Maximum Loss Scenario | Both options unexercised |
When both options are not exercised. This happens when underlying asset price on expire remains at the strike price. |
| Bull Call Spread | Long Straddle (Buy Straddle) | |
|---|---|---|
| Advantages | Instead of straightaway buying a Call Option, this strategy allows you to reduce cost and risk of your investments. |
Earns you unlimited profit in a volatile market while minimizing the loss. |
| Disadvantage | Profit potential is limited. |
The price change has to be bigger to make good profits. |
| Simillar Strategies | Collar, Bull Put Spread | Long Strangle, Short Straddle |
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I understand the Advantage of time decay.
On dis-advantage, how time decay may go against in loss situations ?