Compare Trading Platform Short Strangle (Sell Strangle) and Long Call Butterfly. Find similarities and differences between Short Strangle (Sell Strangle) and Long Call Butterfly Trading Softwares. Find the most powerful trading platform. Find which trading software is better among Short Strangle (Sell Strangle) and Long Call Butterfly.
| Short Strangle (Sell Strangle) | Long Call Butterfly | |
|---|---|---|
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| About Strategy | The Short Strangle (or Sell Strangle) is a neutral strategy wherein a Slightly OTM Call and a Slightly OTM Put Options are sold simultaneously of same underlying asset and expiry date.
This strategy can be used when the trader expects that the underlying stock will experience a very little volatility in the near term.
It is a limited profit and unlimited risk strategy. The maximum profit earn is the net premium received. The maximum loss is achieved when the underlying moves either significantly upwards or downwards at expiration.
A net credit is taken to enter into this strategy. For this reason, the Short Strangles are Credit Spreads.
The usual Short Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY S 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 | two break-even points | |
| Short Strangle (Sell Strangle) | Long Call Butterfly | |
|---|---|---|
| When to use? | The Short Strangle is perfect in a neutral market scenario when the underlying is expected to be less volatile. | This strategy should be used when you're expecting no volatility in the price of the underlying. |
| Market View | Neutral When you are expecting little volatility and movement in the price of the underlying. | Neutral Neutral on the underlying asset and bearish on the volatility. |
| Action |
Sell 1 out-of-the-money put and sell 1 out-of-the-money call which belongs to same underlying asset and has the same expiry date. |
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| Breakeven Point | two break-even points A strangle has two break-even points. Lower Break-even = Strike Price of Put - Net Premium Upper Break-even = Strike Price of Call+ Net Premium" | Upper Breakeven = Higher Strike Price - Net Premium Lower Breakeven = Lower Strike Price + Net Premium |
| Short Strangle (Sell Strangle) | Long Call Butterfly | |
|---|---|---|
| Risks | Unlimited The maximum loss is unlimited in this strategy. You will incur losses when the price of the underlying moves significantly either upwards or downwards at expiration. 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 For maximum profit, the price of the underlying on expiration date must trade between the strike prices of the options. The maximum profit is limited to the net premium received while selling the Options. Maximum Profit = Net Premium Received | 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 Strangle (Sell Strangle) | Long Call Butterfly | |
|---|---|---|
| Advantages | The strategy offers higher chance of profitability in comparison to Short Straddle due to selling of OTM Options. | Profit earning strategy with limited risk in a less volatile market. |
| Disadvantage | Limited reward with high risk exposure. | Premiums and brokerage paid on multiple position may eat your profits. |
| Simillar Strategies | Short Straddle, Long Strangle |
| Compare |
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