Long Put Vs Protective Call (Synthetic Long Put) Options Trading Strategy Comparison

Compare Long Put and Protective Call (Synthetic Long Put) options trading strategies. Find similarities and differences between Long Put and Protective Call (Synthetic Long Put) strategies. Find the best options trading strategy for your trading needs.

Long Put Vs Protective Call (Synthetic Long Put)

	Long Put	Protective Call (Synthetic Long Put)


About Strategy	A Long Put strategy is a basic strategy with the Bearish market view. Long Put is the opposite of Long Call. Here you are trying to take a position to benefit from the fall in the price of the underlying asset. The risk is limited to premium while rewards are unlimited. Long put strategy is similar to short selling a stock. This strategy has many advantages over short selling. This includes the maximum risk is the premium paid and lower investment. The challenge with this strategy is that options have an expiry, unlike stocks which you can hold as long as you want. Let's assume you are bearish on NIFTY and expects its price to fall. You can deploy a Long Put strategy by buying an ATM PUT Option of NIFTY. If the price of NIFTY share... Read More	The Protective Call strategy is a hedging strategy. In this strategy, a trader shorts position in the underlying asset (sell shares or sell futures) and buys an ATM Call Option to cover against the rise in the price of the underlying. This strategy is opposite of the Synthetic Call strategy. It is used when the trader is bearish on the underlying asset and would like to protect 'rise in the price' of the underlying asset. The risk is limited in the strategy while the rewards are unlimited. How to use a Protective Call trading strategy? The usual Protective Call Strategy looks like as below for State Bank of India (SBI) Shares which are currently traded at Rs 275 (SBI Spot Price): Protective Call Orders - SBI Stock Orde... Read More
Market View	Bearish	Bearish
Strategy Level	Beginners	Beginners
Options Type	Put	Call + Underlying
Number of Positions	1	2
Risk Profile	Limited	Limited
Reward Profile	Unlimited	Unlimited
Breakeven Point	Strike Price of Long Put - Premium Paid	Underlying Price - Call Premium

When and how to use Long Put and Protective Call (Synthetic Long Put)?

	Long Put	Protective Call (Synthetic Long Put)
When to use?	A long put option strategy works well when you're expecting the underlying asset to sharply decline or be volatile in near future.	The Protective Call option strategy is used when you are bearish in market view and want to short shares to benefit from it. The strategy minimizes your risk in the event of prime movements going against your expectations.
Market View	Bearish When you are expecting a drop in the price of the underlying and rise in the volatility.	Bearish When you are bearish on the underlying but want to protect the upside.
Action	Buy Put Option Let's assume you're Bearish on Nifty currently trading at 10,400. You expect it to fall to 10,000 level. You buy a Put option with a strike price 10,000. If the Nifty goes below 10,000, you will make a profit on exercising the option. In case the Nifty rises contrary to expectation, you will incur a maximum loss of the premium.	Sell Underlying Stock or Future Buy ATM Call Option
Breakeven Point	Strike Price of Long Put - Premium Paid The breakeven is achieved when the strike price of the Put Option is equal to the premium paid.	Underlying Price - Call Premium When the price of the underlying is equal to the total of the sale price of the underlying and premium paid.

Compare Risks and Rewards (Long Put Vs Protective Call (Synthetic Long Put))

	Long Put	Protective Call (Synthetic Long Put)
Risks	Limited The risk for this strategy is limited to the premium paid for the Put Option. Maximum loss will happen when price of underlying is greater than strike price of the Put option.	Limited The maximum loss is limited to the premium paid for buying the Call option. It occurs when the price of the underlying is less than the strike price of Call Option. Maximum Loss = Call Strike Price - Sale Price of Underlying + Premium Paid
Rewards	Unlimited This strategy has the potential to earn unlimited profit. The profit will depend on how low the price of the underlying drops.	Unlimited The maximum profit is unlimited in this strategy. The profit is dependent on the sale price of the underlying. Profit = Sale Price of Underlying - Price of Underlying - Premium Paid
Maximum Profit Scenario	Underlying goes down and Option exercised Maximum Profit = Unlimited Maximum Profit Achieved When Price of Underlying = 0 Profit = Strike Price of Long Put - Premium Paid	Underlying goes down and Option not exercised
Maximum Loss Scenario	Underlying goes up and Option not exercised Max Loss = Premium Paid + Commissions Paid Max Loss Occurs When Price of Underlying >= Strike Price of Long Put	Underlying goes down and Option exercised

Pros & Cons or Long Put and Protective Call (Synthetic Long Put)

	Long Put	Protective Call (Synthetic Long Put)
Advantages	Unlimited profit potential with risk only limited to loss of premium.	Minimizes the risk when entering into a short position while keeping the profit potential limited.
Disadvantage	You may incur 100% loss in premium if the underlying price rises.	Premium paid for Call Option may eat into your profits.
Simillar Strategies	Protective Call, Short Put, Long Straddle	Long Put

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