Comparision (DIAGONAL BULL CALL SPREAD
VS LONG COMBO)
Compare Strategies
DIAGONAL BULL CALL SPREAD
LONG COMBO
About Strategy
Diagonal Bull Call Spread Option Strategy
This strategy is implemented by a trader when he is neutral – moderately bullish in the near-month contract and bullish in the mid-month contract. It involves sale of 1 Near-Month OTM Call Option and buying of 1 Mid Month ITM Call Option.
Long Combo Option Trading Strategy is implemented when a trader is bullish in nature and expects the stock price to rise in the near future. Here a trader will sell one ‘Out of the Money’ Put Option and buy one ‘Out of the Money’ Call Option. This trade will require less capital to implement since the amount required to buy the call will be covered by the amount received ..
DIAGONAL BULL CALL SPREAD Vs LONG COMBO - Risk & Reward
DIAGONAL BULL CALL SPREAD
LONG COMBO
Maximum Profit Scenario
Underlying asset goes up and Call option exercised
Maximum Loss Scenario
Underlying asset goes down and Put option exercised
Risk
Limited
Unlimited
Reward
Limited
Unlimited
DIAGONAL BULL CALL SPREAD Vs LONG COMBO - Strategy Pros & Cons
DIAGONAL BULL CALL SPREAD
LONG COMBO
Similar Strategies
Bull Put Spread
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Disadvantage
• Losses can keep on increasing as the price of stock goes down. • High risk strategy.
Advantages
• Capital investment is low and returns are high. • Unlimited reward, returns keep on increasing with the increase on stock price. • Leverage facility provided by this strategy is very beneficial.