Compare Trading Platform Long Strangle (Buy Strangle) and Short Call Butterfly. Find similarities and differences between Long Strangle (Buy Strangle) and Short Call Butterfly Trading Softwares. Find the most powerful trading platform. Find which trading software is better among Long Strangle (Buy Strangle) and Short Call Butterfly.
| Long Strangle (Buy Strangle) | Short Call Butterfly | |
|---|---|---|
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| About Strategy | The Long Strangle (or Buy Strangle or Option Strangle) is a neutral strategy wherein Slightly OTM Put Options and Slightly OTM Call are bought simultaneously with same underlying asset and expiry date.
This strategy can be used when the trader expects that the underlying stock will experience significant volatility in the near term.
It is a limited risk and unlimited reward strategy. The maximum loss is the net premium paid while maximum profit is achieved when the underlying moves either significantly upwards or downwards at expiration.
The usual Long Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY Spot Price):
Options Strangle Orders
OrdersNIFTY Strike Price
Buy 1 Slightly OTM PutN Read More | Short Call Butterfly (or Short Butterfly) is a neutral strategy similar to Long Butterfly but bullish on the volatility. This strategy is a limited risk and limited profit strategy.
This strategy consists of two long calls at a middle strike (or ATM) and one short call each at a lower and upper strike. All the options must have the same expiration date. Also, the upper and lower strikes (or wings) must both be equidistant from the middle strike (or body).
In simple terms, it involves Sell 1 ITM Call, Buy 2 ATM Calls and Sell 1 OTM Call. The strike prices of all Options should be at equal distance from the current price as shown in the example below.
The usual Short Butterfly strategy looks like as below for NIFTY current index value as 1 Read More |
| Market View | Neutral | Neutral |
| Strategy Level | Beginners | Advance |
| Options Type | Call + Put | Call |
| Number of Positions | 2 | 4 |
| Risk Profile | Limited | Limited |
| Reward Profile | Unlimited | Limited |
| Breakeven Point | two break-even points | 2 Break-even Points |
| Long Strangle (Buy Strangle) | Short Call Butterfly | |
|---|---|---|
| When to use? | A Long Strangle is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc. | This strategy is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc. |
| Market View | Neutral When you are unsure of the direction of the underlying but expecting high volatility in it. | Neutral When you are unsure about the direction in the movement in the price of the underlying but are expecting high volatility in it in the near future. |
| Action |
Suppose Nifty is currently at 10400 and you expect the price to move sharply but are unsure about the direction. In such a scenario, you can execute long strangle strategy by buying Nifty at 10600 and at 10800. The net premium paid will be your maximum loss while the profit will depend on how high or low the index moves. |
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| Breakeven Point | two break-even points A Options Strangle strategy has two break-even points. Lower Breakeven Point = Strike Price of Put - Net Premium Upper Breakeven Point = Strike Price of Call + Net Premium | 2 Break-even Points There are 2 break even points in this strategy.
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| Long Strangle (Buy Strangle) | Short Call Butterfly | |
|---|---|---|
| Risks | Limited Max Loss = Net Premium Paid The maximum loss is limited to the net premium paid in the long strangle strategy. It occurs when the price of the underlying is trading between the strike price of Options. | Limited The maximum risk is limited. Maximum Risk = Higher strike price- Lower Strike Price - Net Premium |
| Rewards | Unlimited Maximum profit is achieved when the underlying moves significantly up and down at expiration. Profit = Price of Underlying - Strike Price of Long Call - Net Premium Paid Or Profit = Strike Price of Long Put - Price of Underlying - Net Premium Paid | Limited The profit is limited to the net premium received. This happens when the price of the underlying is trading beyond the range of strike prices at expiration date. |
| Maximum Profit Scenario | One Option exercised | All Options exercised or not exercised |
| Maximum Loss Scenario | Both Option not exercised | Only ITM Call exercised |
| Long Strangle (Buy Strangle) | Short Call Butterfly | |
|---|---|---|
| Advantages | This strategy requires no investment as net premium is positive and received. It allows you to benefit from high volatile market scenarios without the need to speculate on the direction of price movement. | |
| Disadvantage | The strategy requires significant price movements in the underlying to gain profits. | Profitability depends on significant movement in the price of the underlying. |
| Simillar Strategies | Long Straddle, Short Strangle | Long Straddle, Long Call Butterfly |
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