Short Put Vs Long Combo 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.

Long Combo strategy should be deployed when you're Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it.

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

When you are expecting the price of the underlying to move up in near future.

• 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.

• Sell OTM Put Option
• Buy OTM Call Option

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.

Long Combo is a high risk strategy. You will start losing money when the price of the underlying moves below the lower strike price. Your losses can be unlimited depending on how low the price of underlying falls.

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

Long Combo is a high return strategy. You will earn profits if the underlying moves above the higher price of the underlying. Your profit will depend on how high the price of the underlying moves.

Underlying doesn't go down and options remain exercised.

Underlying goes up and Call option exercised

Underlying goes down and options remain exercised.

Underlying goes down and Put option exercised

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

Brings down the cost of investing in a Bullish stocks. And delivers high returns if prices move up.

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

Losses can be high if prices don't move as expected.

Bull Put Spread, Covered Call, Short Straddle