Compare Strategies
| DIAGONAL BEAR PUT SPREAD | CALL BACKSPREAD | |
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| About Strategy |
Diagonal Bear Put SpreadWhen the trader is neutral – bearish in the near-month and bearish in the mid-month, he will apply Diagonal Bear Put Spread. This strategy involves buying Mid-Month ITM Put Options and selling (short/write) equal number of Near-Month OTM Put Options, of the same underlying asset. This strategy bags limited rewards with limited risk. |
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 .. |
DIAGONAL BEAR PUT SPREAD Vs CALL BACKSPREAD - Details
| DIAGONAL BEAR PUT SPREAD | CALL BACKSPREAD | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) |
| Number Of Positions | 2 | 3 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Limited | Unlimited |
| Risk Profile | Limited | Limited |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
DIAGONAL BEAR PUT SPREAD Vs CALL BACKSPREAD - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | CALL BACKSPREAD | |
|---|---|---|
| Market View | Bearish | Bullish |
| When to use? | When the trader is neutral – bearish in the near-month and bearish in the mid-month, he will apply Diagonal Bear Put Spread. This strategy involves buying Mid-Month ITM Put Options and selling (short/write) equal number of Near-Month OTM Put Options, of the same underlying asset | This strategy is used when the investor expects the price of the stock to rise in the future. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | Sell 1 ITM Call, BUY 2 OTM Call |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
DIAGONAL BEAR PUT SPREAD Vs CALL BACKSPREAD - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | CALL BACKSPREAD | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | Unlimited profit potential if the stock goes in upward direction. |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | Strike Price of long call - Strike Price of short call - Net premium received |
| Risk | Limited | Limited |
| Reward | Limited | Unlimited |
DIAGONAL BEAR PUT SPREAD Vs CALL BACKSPREAD - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | CALL BACKSPREAD | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | - |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | |
| Advantages | The Risk is limited. | • Unlimited profit potential. |