Compare Strategies
| STOCK REPAIR | IRON BUTTERFLY | |
|---|---|---|
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| About Strategy |
Stock Repair Option StrategyStock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery. Suppose Mr. X has |
Iron Butterfly Option StrategyThis strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. A trader will buy 1 OTM Put Option, sell 1 ATM Put Option, sell 1 ATM Call Option, buy 1 OTM Call Option. Due to offsetting of long and short positions, this strategy bags limited profit with limited risk.
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STOCK REPAIR Vs IRON BUTTERFLY - Details
| STOCK REPAIR | IRON BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 3 | 4 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received |
STOCK REPAIR Vs IRON BUTTERFLY - When & How to use ?
| STOCK REPAIR | IRON BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| When to use? | Stock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery. | This strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Buy 1 OTM Put, Sell 1 ATM Put, Sell 1 ATM Call, Buy 1 OTM Call |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received |
STOCK REPAIR Vs IRON BUTTERFLY - Risk & Reward
| STOCK REPAIR | IRON BUTTERFLY | |
|---|---|---|
| Maximum Profit Scenario | Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Strike Price of Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs IRON BUTTERFLY - Strategy Pros & Cons
| STOCK REPAIR | IRON BUTTERFLY | |
|---|---|---|
| Similar Strategies | Long Put Butterfly, Neutral Calendar Spread | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Large commissions involved. • Probability of losses are higher. |
| Advantages | • This strategy creates an opportunity to recover losses by lowering our breakeven. • No margin required. • No additional downside risk and costs nothing to put on. | • Less amount of capital investment, steady income with low risk. • Traders can predict maximum loss and profit. • Versatile strategy, investors can transform position into bear call spread or bull put spread easily. |