Compare Trading Platform Short Straddle (Sell Straddle or Naked Straddle) and Long Call Butterfly. Find similarities and differences between Short Straddle (Sell Straddle or Naked Straddle) and Long Call Butterfly Trading Softwares. Find the most powerful trading platform. Find which trading software is better among Short Straddle (Sell Straddle or Naked Straddle) and Long Call Butterfly.
| Short Straddle (Sell Straddle or Naked Straddle) | Long Call Butterfly | |
|---|---|---|
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| About Strategy | The Short Straddle (or Sell Straddle or naked Straddle) is a neutral options strategy. This strategy involves simultaneously selling a call and a put option of the same underlying asset, same strike price and same expire date. A Short Straddle strategy is used in case of little volatility market scenarios wherein you expect none or very little movement in the price of the underlying. Such scenarios arise when there is no major news expected until expire. This is a limited profit and unlimited loss strategy. The maximum profit earned when, on expire date, the underlying asset is trading at the strike price at which the options are sold. The maximum loss is unlimited and occurs when underlying asset price moves sharply in upward or down...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 | Neutral | Neutral |
| Strategy Level | Advance | Advance |
| Options Type | Call + Put | Call |
| Number of Positions | 2 | 4 |
| Risk Profile | Unlimited | Limited |
| Reward Profile | Limited | Limited |
| Breakeven Point | 2 Breakeven Points |
| Short Straddle (Sell Straddle or Naked Straddle) | Long Call Butterfly | |
|---|---|---|
| When to use? | This strategy is to be used when you expect a flat market in the coming days with very less movement in the prices of underlying asset. | This strategy should be used when you're expecting no volatility in the price of the underlying. |
| Market View | Neutral When trader don't expect much movement in its price in near future. | Neutral Neutral on the underlying asset and bearish on the volatility. |
| Action |
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| Breakeven Point | 2 Breakeven Points There are 2 break even points in this strategy. The upper break even is hit when the underlying price is equal to the total of strike price of short call and net premium paid. The lower break even is hit when the underlying price is equal to the difference between strike price of short Put and net premium paid. Break-even points: Lower Breakeven = Strike Price of Put - Net Premium Upper breakeven = Strike Price of Call+ Net Premium | Upper Breakeven = Higher Strike Price - Net Premium Lower Breakeven = Lower Strike Price + Net Premium |
| Short Straddle (Sell Straddle or Naked Straddle) | Long Call Butterfly | |
|---|---|---|
| Risks | Unlimited There is a possibility of unlimited loss in the short straddle strategy. The loss occurs when the price of the underlying significantly moves upwards and downwards. Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received Or Loss= Strike Price of Short Put - Price of Underlying - Net Premium Received | Limited Risk in the Long Call Butterfly options strategy is limited to the net premium paid. |
| Rewards | Limited Maximum profit is limited to the net premium received. The profit is achieved when the price of the underlying is equal to either strike price of short Call or Put. | Limited Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit. |
| Maximum Profit Scenario | Both Option not exercised | Only ITM Call exercised |
| Maximum Loss Scenario | One Option exercised | All options exercised or all options not exercised. |
| Short Straddle (Sell Straddle or Naked Straddle) | Long Call Butterfly | |
|---|---|---|
| Advantages | It allows you to benefit from double time decay and earn profit in a less volatile scenario. | Profit earning strategy with limited risk in a less volatile market. |
| Disadvantage | Unlimited losses if the price of the underlying move significantly in either direction. | Premiums and brokerage paid on multiple position may eat your profits. |
| Similar Strategies | Short Strangle, Long Straddle |
