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Comparision (SHORT CALL CONDOR SPREAD VS COVERED CALL)

 

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  SHORT CALL CONDOR SPREAD COVERED CALL
About Strategy

Short Call Condor Spread Option Strategy

Short Call Condor Spread is the opposite of Long Call Condor Spread i.e. sell 1 Deep ITM Call Option, buy 1 ITM Call Option, buy 1 OTM Call Option, sell 1 Deep OTM Call Option. Similar to Long Call Condor, the risk and rewards associated with this strategy are limited. Credit is received at the time of entering into this strategy.

Covered Call Option Strategy

Mr. X owns Reliance Shares and expects the price to rise in the near future. Mr. X is entitled to receive dividends for the shares he hold in cash market. Covered Call Strategy involves selling of OTM Call Option of the same underlying asset. The OTM Call Option Strike Price will generally be the price, where Mr. X will look to get out o ..

SHORT CALL CONDOR SPREAD Vs COVERED CALL - Details

SHORT CALL CONDOR SPREAD COVERED CALL
Market View Volatile Bullish
Type (CE/PE) CE (Call Option) CE (Call Option)
Number Of Positions 4 2
Strategy Level Advance Advance
Reward Profile Limited Limited
Risk Profile Limited Unlimited
Breakeven Point Lower Breakeven = Lower Strike Price + Net Premium, Upper breakeven = Higher Strike Price - Net Premium Purchase Price of Underlying- Premium Received

SHORT CALL CONDOR SPREAD Vs COVERED CALL - When & How to use ?

SHORT CALL CONDOR SPREAD COVERED CALL
Market View Volatile Bullish
When to use? This strategy is used when an investor expect the price of the underlying stock to be very volatile. An investor has a short term neutral view on the asset and for this reason holds the asset long and has a short position to generate income.
Action Buy ITM Call Option + Buy OTM Call Option + Sell Deep OTM Call Option + Sell Deep ITM Call Option (Buy Underlying) (Sell OTM Call Option)
Breakeven Point Lower Breakeven = Lower Strike Price + Net Premium, Upper breakeven = Higher Strike Price - Net Premium Purchase Price of Underlying- Premium Received

SHORT CALL CONDOR SPREAD Vs COVERED CALL - Risk & Reward

SHORT CALL CONDOR SPREAD COVERED CALL
Maximum Profit Scenario Strike Price of Lower Strike Short Call - Strike Price of Lower Strike Long Call - Net Premium Paid [Call Strike Price - Stock Price Paid] + Premium Received
Maximum Loss Scenario Strike Price of Lower Strike Long Call - Strike Price of Lower Strike Short Call - Net Premium Received + Commissions Paid Purchase Price of Underlying - Price of Underlying) + Premium Received
Risk Limited Unlimited
Reward Limited Limited

SHORT CALL CONDOR SPREAD Vs COVERED CALL - Strategy Pros & Cons

SHORT CALL CONDOR SPREAD COVERED CALL
Similar Strategies Short Strangle Bull Call Spread
Disadvantage • Amount of profit is low in comparison with other strategies. • As this strategy has 4 legs so the brokerage cost is higher that will affect your profit. • Unlimited risk, limited reward. • Inability to earn interest on the proceed used to buy the underlying stock.
Advantages • This strategy allows you to profit from highly volatile underlying assets moving in any direction. • Earn profit with little or no investment. • Wider profit zone. • Profit from option premium, rise in the underlying stock and dividends on the stock. • Allows you to generate income from your holding. • Profit when underlying stock price rise, move sideways or marginal fall.

SHORT CALL CONDOR SPREAD

COVERED CALL