Bull Put Spread Vs Covered Strangle Options Trading Strategy Comparison

Compare Bull Put Spread and Covered Strangle options trading strategies. Find similarities and differences between Bull Put Spread and Covered Strangle strategies. Find the best options trading strategy for your trading needs.

Bull Put Spread Vs Covered Strangle

	Bull Put Spread	Covered Strangle


About Strategy	A Bull Put Spread (or Bull Put Credit Spread) strategy is a Bullish strategy to be used when you're expecting the price of the underlying instrument to mildly rise or be less volatile. The strategy involves buying a Put Option and selling a Put Option at different strike prices. The risk and reward for this strategy is limited. A Bull Put Strategy involves Buy OTM Put Option and Sell ITM Put Option. For example, If you are of the view that the price of Reliance Shares will moderately gain or drop its volatility in near future. If Reliance is currently trading at Rs 600 then you will buy an OTM Put Option at Rs 700 and a sell an ITM Put Option at Rs 550. You will make a profit when, at expiry, Reliance closes at Rs 700 level and incur losse... Read More	The covered strangle option strategy is a bullish strategy. The strategy is created by owning or buying a stock and selling an OTM Call and OTM Put. It is called covered strangle because the upside risk of the strangle is covered or minimized. The strategy is perfect to use when you are prepared to sell the holding or bought shares at a higher price if the market moves up but would also is ready to buy more shares if the market moves downwards. The profit and in this strategy is unlimited while the risk is only on the downside.
Market View	Bullish	Bullish
Strategy Level	Advance	Advance
Options Type	Put	Call + Put + Underlying
Number of Positions	2	3
Risk Profile	Limited	Limited
Reward Profile	Limited	Limited
Breakeven Point	Strike price of short put - net premium paid	two break-even points

When and how to use Bull Put Spread and Covered Strangle?

	Bull Put Spread	Covered Strangle
When to use?	This strategy works well when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall.	A covered strangle strategy can be used when you are bullish on the market but also want to cover any downside risk. You are prepared to sell the shares on profit but are also willing to buy more shares in case the prices fall.
Market View	Bullish When you are expecting a moderate rise in the price of the underlying or less volatility.	Bullish The Strategy is perfect to apply when you're bullish on the market and expecting less volatility in the market.
Action	Buy OTM Put Option Sell ITM Put Option A Bull Put Strategy involves Buy OTM Put Option + Sell ITM Put Option. For example, If you are of the view that the price of Reliance Shares will moderately gain or drop its volatility in near future. If Reliance is currently trading at 600 then you will buy a OTM PUT OPTION at 700 and a sell a ITM PUT OPTION at 550. You will make a profit when at expiry Reliance closes at 700 level and incur losses if the prices fall down below the current price.	Buy 100 shares + Sell OTM Call +Sell OTM Put The covered strangle options strategy can be executed by buying 100 shares of a stock while simultaneously selling an OTM Put and Call of the same the stock and similar expiration date.
Breakeven Point	Strike price of short put - net premium paid	two break-even points There are 2 break-even points in the covered strangle strategy. One is the Upper break even point which is the sum of strike price of the Call option and premium received while the other is the lower break-even point which is the difference strike price of short Put and premium received.

Compare Risks and Rewards (Bull Put Spread Vs Covered Strangle)

	Bull Put Spread	Covered Strangle
Risks	Limited Maximum loss occurs when the stock price moves below the lower strike price on expiration date. Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received Max Loss Occurs When Price of Underlying <= Strike Price of Long Put	Limited The risk on this strategy is only on the downside when the price moves below the strike price of the Put option.
Rewards	Limited Maximum profit happens when the price of the underlying moves above the strike price of Short Put on expiration date. Max Profit = Net Premium Received	Limited The maximum profit on this strategy happens when the stock price is above the call price on expiry. The profit is the total of the gain from buying/selling stocks and net premium received on selling options.
Maximum Profit Scenario	Both options unexercised	You will earn the maximum profit when the price of the stock is above the Call option strike price on expiry. You will be assigned on the Call option, would be able to sell holding shares on profit while retaining the premiums received while selling the options.
Maximum Loss Scenario	Both options exercised	The maximum loss would be when the stock price falls drastically and turns worthless. The premiums received while selling the options will compensate for some of the loss.

Pros & Cons or Bull Put Spread and Covered Strangle

	Bull Put Spread	Covered Strangle
Advantages	Allows you to benefit from time decay in profit situations. Helps you profit from 3 scenarios: rise, sideway movements and marginal fall of the underlying.	As the strategy involves buying shares when prices fall, there is long-term gain even if their short-term loss. There is no upside risk due to the long position in stocks. Allows you to earn income in a moderately bullish market.
Disadvantage	Limited profit. Time decay may go against you in loss situations.	The substantial risk when the price moves downwards. Risk of assignments.
Simillar Strategies	Bull Call Spread, Bear Put Spread, Collar	Long Strangle, Short Strangle

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