Compare Trading Platform Covered Call and Bear Put Spread. Find similarities and differences between Covered Call and Bear Put Spread Trading Softwares. Find the most powerful trading platform. Find which trading software is better among Covered Call and Bear Put Spread.
| Covered Call | Bear Put Spread | |
|---|---|---|
 |  | |
| About Strategy | A Covered Call is a basic option trading strategy frequently used by traders to protect their huge share holdings. It is a strategy in which you own shares of a company and Sell OTM Call Option of the company in similar proportion. The Call Option would not get exercised unless the stock price increases. Till then you will earn the Premium. This a unlimited risk and limited reward strategy. Let's assume you own TCS Shares and your view is that its price will rise in the near future. You will Sell OTM Call Option of TCS at a price, where you target to sell your shares. You will receive premium amount for selling the Call option and the premium is your income....Read More | The Bear Put strategy involves selling a Put Option while simultaneously buying a Put option. Contrary to Bear Call Spread, here you pay the higher premium and receive the lower premium. So there is a net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear put debit spread as a net debit is taken upon entering the trade. This strategy has a limited risk as well as limited rewards. How to use the bear put spread options strategy? The bear put spread strategy looks like...Read More |
| Market View | Bullish | Bearish |
| Strategy Level | Advance | Advance |
| Options Type | Call + Underlying | Put |
| Number of Positions | 2 | 2 |
| Risk Profile | Unlimited | Limited |
| Reward Profile | Limited | Limited |
| Breakeven Point | Purchase Price of Underlying- Premium Recieved | Strike Price of Long Put - Net Premium |
| Covered Call | Bear Put Spread | |
|---|---|---|
| When to use? | The covered call option strategy works well when you have a mildly Bullish market view and you expect the price of your holdings to moderately rise in future. | The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations. |
| Market View | Bullish When you are expecting a moderate rise in the price of the underlying or less volatility. | Bearish When you are expecting the price of the underlying to moderately drop. |
| Action |
Let's assume you own TCS Shares and your view is that its price will rise in the near future. You will Sell OTM Call Option of TCS at a price, where you target to sell your shares. You will receive premium amount for selling the Call option and the premium is your income. |
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| Breakeven Point | Purchase Price of Underlying- Premium Recieved | Strike Price of Long Put - Net Premium The breakeven point is achieved when the price of the underlying is equal to strike price of long Put minus net premium. |
| Covered Call | Bear Put Spread | |
|---|---|---|
| Risks | Unlimited Maximum loss is unlimited and depends on by how much the price of the underlying falls. Loss happens when price of underlying goes below the purchase price of underlying. Loss = (Purchase Price of Underlying - Price of Underlying) + Premium Received | Limited The maximum loss is limited to net premium paid. It occurs when the price of the underlying is less than strike price of long Put.. Max Loss = Net Premium Paid. |
| Rewards | Limited You earn premium for selling a call. Maximum profit happens when purchase price of underlying moves above the strike price of Call Option. Max Profit= [Call Strike Price - Stock Price Paid] + Premium Received | Limited The maximum profit is achieved when the strike price of short Put is greater than the price of the underlying.. Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid. |
| Maximum Profit Scenario | Underlying rises to the level of the higher strike or above. | Underlying goes down and both options exercised |
| Maximum Loss Scenario | Underlying below the premium received | Underlying goes up and both options not exercised |
| Covered Call | Bear Put Spread | |
|---|---|---|
| Advantages | It helps you generate income from your holdings. Also allows you to benefit from 3 movements of your stocks: rise, sidewise and marginal fall. | Risk is limited. It reduces the cost of investment. |
| Disadvantage | Unlimited risk for limited reward. | The profit is limited. |
| Similar Strategies | Bull Call Spread | Bear Call Spread, Bull Call Spread |
