Compare Strategies
BEAR PUT SPREAD | CALL BACKSPREAD | |
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About Strategy |
Bear Put Spread Option StrategyWhen a trader is moderately bearish on the market he can implement this strategy. Bear-Put-Spread involves buying of ITM Put Option and selling of an OTM Put Option. If prices fall, the ITM Put option starts making profits and the OTM Put option also adds to profit at a certain extent if the expiry price stays above the OTM strike. However, if it falls below the OTM |
Call Backspread Option Trading This strategy is adopted by traders who are bullish in nature. He expects market and volatility to rise in the near future. A trader need not be direction specific here (i.e. an upward or downward trend, but a small bias towards an uptrend should always be present, as the gains will be much higher once the market moves up r .. |
BEAR PUT SPREAD Vs CALL BACKSPREAD - Details
BEAR PUT SPREAD | CALL BACKSPREAD | |
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Market View | Bearish | Bullish |
Type (CE/PE) | PE (Put Option) | CE (Call Option) |
Number Of Positions | 2 | 3 |
Strategy Level | Advance | Advance |
Reward Profile | Limited | Unlimited |
Risk Profile | Limited | Limited |
Breakeven Point | Strike Price of Long Put - Net Premium | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
BEAR PUT SPREAD Vs CALL BACKSPREAD - When & How to use ?
BEAR PUT SPREAD | CALL BACKSPREAD | |
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Market View | Bearish | Bullish |
When to use? | The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations. | This strategy is used when the investor expects the price of the stock to rise in the future. |
Action | Buy ITM Put Option, Sell OTM Put Option | Sell 1 ITM Call, BUY 2 OTM Call |
Breakeven Point | Strike Price of Long Put - Net Premium | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
BEAR PUT SPREAD Vs CALL BACKSPREAD - Risk & Reward
BEAR PUT SPREAD | CALL BACKSPREAD | |
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Maximum Profit Scenario | Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid. | Unlimited profit potential if the stock goes in upward direction. |
Maximum Loss Scenario | Max Loss = Net Premium Paid. | Strike Price of long call - Strike Price of short call - Net premium received |
Risk | Limited | Limited |
Reward | Limited | Unlimited |
BEAR PUT SPREAD Vs CALL BACKSPREAD - Strategy Pros & Cons
BEAR PUT SPREAD | CALL BACKSPREAD | |
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Similar Strategies | Bear Call Spread, Bull Call Spread | - |
Disadvantage | • Limited profit. • Early assignment risk. | |
Advantages | • If the strike price, expiration date or underlying stocks are rightly chosen then risk of losses would be limited to the net premium paid. • This strategy works well in declining markets. • Limited risk. | • Unlimited profit potential. |