Short Put Vs Bull Call Spread Options Trading Strategy Comparison

Short Put works well when you're Bullish that the price of the underlying will not fall beyond a certain level.

A Bull Call Spread strategy works well when you're Bullish of the market but expect the underlying to gain mildly in near future.

When you are expecting the price or volatility of the underlying to increase marginally.

When you are expecting a moderate rise in the price of the underlying.

• Sell Put Option

A short put strategy involves selling a Put Option only. So if you see that the shares of a Company A will not move below a 1000 then you sell the Put Option of that stock at 1000 and receive the premium amount. The premium received will be the maximum profit you can earn from this deal. However, if the price of the underlying moves below 1000 than you will incur losses.

• Buy ITM Call Option
• Sell OTM Call Option

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.

There is no limit to losses incurred in the trade. The risk is when the price of the underlying falls, and the Put is exercised. You are then obliged to buy the underlying at the strike price.

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.

The profit is limited to premium received in your account when you sell the Put Option.

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

Underlying doesn't go down and options remain exercised.

Both options exercised

Underlying goes down and options remain exercised.

Both options unexercised

It allows you benefit from time decay. And earn income in a rising or range bound market scenario.

Instead of straightaway buying a Call Option, this strategy allows you to reduce cost and risk of your investments.

It is a high risk strategy and may cause huge losses if the price of the underlying falls steeply.

Profit potential is limited.

Bull Put Spread, Covered Call, Short Straddle