Compare Trading Platform Protective Call (Synthetic Long Put) and Long Call Butterfly. Find similarities and differences between Protective Call (Synthetic Long Put) and Long Call Butterfly Trading Softwares. Find the most powerful trading platform. Find which trading software is better among Protective Call (Synthetic Long Put) and Long Call Butterfly.
| Protective Call (Synthetic Long Put) | Long Call Butterfly | |
|---|---|---|
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| About Strategy | 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 | Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price.
Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls. Read More |
| Market View | Bearish | Neutral |
| Strategy Level | Beginners | Advance |
| Options Type | Call + Underlying | Call |
| Number of Positions | 2 | 4 |
| Risk Profile | Limited | Limited |
| Reward Profile | Unlimited | Limited |
| Breakeven Point | Underlying Price - Call Premium | |
| Protective Call (Synthetic Long Put) | Long Call Butterfly | |
|---|---|---|
| When to use? | 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. | This strategy should be used when you're expecting no volatility in the price of the underlying. |
| Market View | Bearish When you are bearish on the underlying but want to protect the upside. | Neutral Neutral on the underlying asset and bearish on the volatility. |
| Action |
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| Breakeven Point | 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. | Upper Breakeven = Higher Strike Price - Net Premium Lower Breakeven = Lower Strike Price + Net Premium |
| Protective Call (Synthetic Long Put) | Long Call Butterfly | |
|---|---|---|
| Risks | 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 | Limited Risk in the Long Call Butterfly options strategy is limited to the net premium paid. |
| Rewards | 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 | Limited Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit. |
| Maximum Profit Scenario | Underlying goes down and Option not exercised | Only ITM Call exercised |
| Maximum Loss Scenario | Underlying goes down and Option exercised | All options exercised or all options not exercised. |
| Protective Call (Synthetic Long Put) | Long Call Butterfly | |
|---|---|---|
| Advantages | Minimizes the risk when entering into a short position while keeping the profit potential limited. | Profit earning strategy with limited risk in a less volatile market. |
| Disadvantage | Premium paid for Call Option may eat into your profits. | Premiums and brokerage paid on multiple position may eat your profits. |
| Simillar Strategies | Long Put |
| Compare |
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