Compare Strategies
| STOCK REPAIR | RATIO PUT WRITE | |
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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 |
Ratio Put Write Option StrategyThis strategy is implemented by selling (short) the underlying asset in the cash/futures market. Simultaneously, sell ATM Puts double the number of long quantity. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited. .. |
STOCK REPAIR Vs RATIO PUT WRITE - Details
| STOCK REPAIR | RATIO PUT WRITE | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Max Profit Achieved When Price of Underlying = Strike Price of Short Puts |
| Risk Profile | Limited | Loss Occurs When Price of Underlying < Strike Price of Short Put - Net Premium Received OR Price of Underlying > Strike Price of Short Put + Net Premium Received |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
STOCK REPAIR Vs RATIO PUT WRITE - When & How to use ?
| STOCK REPAIR | RATIO PUT WRITE | |
|---|---|---|
| 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 by selling (short) the underlying asset in the cash/futures market. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell 2 ATM Puts |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
STOCK REPAIR Vs RATIO PUT WRITE - Risk & Reward
| STOCK REPAIR | RATIO PUT WRITE | |
|---|---|---|
| Maximum Profit Scenario | Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Price of Underlying - Sale Price of Underlying - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs RATIO PUT WRITE - Strategy Pros & Cons
| STOCK REPAIR | RATIO PUT WRITE | |
|---|---|---|
| Similar Strategies | Short Strangle and Short Straddle | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Potential loss is higher than gain. • Limited profit. |
| 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. |