Compare Strategies
| STOCK REPAIR | RISK REVERSAL | |
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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 |
Risk Reversal Option StrategyThis strategy protects an investor from unfavourable price movements in the position but limits the profits can be made on that position. A risk reversal is a hedging strategy that protects a long or short position by using put and call options. In this one option is buying and other is written. In this strategy the trader has to pay a premium, while the written option prod .. |
STOCK REPAIR Vs RISK REVERSAL - Details
| STOCK REPAIR | RISK REVERSAL | |
|---|---|---|
| Market View | Bullish | Bullish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Unlimited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | Premium received - Put Strike Price |
STOCK REPAIR Vs RISK REVERSAL - When & How to use ?
| STOCK REPAIR | RISK REVERSAL | |
|---|---|---|
| Market View | Bullish | Bullish |
| 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 can be used for hedging. When an investor want to protect long or short position by using a call and put option. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | This strategy work when an investor want to hedge their position by buying a put option and selling a call option. |
| Breakeven Point | Premium received - Put Strike Price |
STOCK REPAIR Vs RISK REVERSAL - Risk & Reward
| STOCK REPAIR | RISK REVERSAL | |
|---|---|---|
| Maximum Profit Scenario | You have unlimited profit potential to the upside. | |
| Maximum Loss Scenario | You have nearly unlimited downside risk as well because you are short the put | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Unlimited |
STOCK REPAIR Vs RISK REVERSAL - Strategy Pros & Cons
| STOCK REPAIR | RISK REVERSAL | |
|---|---|---|
| Similar Strategies | - | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | Unlimited Risk. |
| 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. | Unlimited profit. |