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Comparision (BEAR PUT SPREAD VS SHORT PUT)

 

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  BEAR PUT SPREAD SHORT PUT
About Strategy

Bear Put Spread Option Strategy 

When a trader is moderately bearish on the market he can implement this strategy. Bear-Put-Spread involves buying of ITM Put Option and selling of an OTM Put Option. If prices fall, the ITM Put option starts making profits and the OTM Put option also adds to profit at a certain extent if the expiry price stays above the OTM strike. However, if it falls below the OTM

Short Put Option Strategy

A trader will short put if he is bullish in nature and expects the underlying asset not to fall below a certain level.
Risk: Losses will be potentially unlimited if the stock skyrockets above the strike price of put.

BEAR PUT SPREAD Vs SHORT PUT - Details

BEAR PUT SPREAD SHORT PUT
Market View Bearish Bullish
Type (CE/PE) PE (Put Option) PE (Put Option)
Number Of Positions 2 1
Strategy Level Advance Beginners
Reward Profile Limited Limited
Risk Profile Limited Unlimited
Breakeven Point Strike Price of Long Put - Net Premium Strike Price - Premium

BEAR PUT SPREAD Vs SHORT PUT - When & How to use ?

BEAR PUT SPREAD SHORT PUT
Market View Bearish Bullish
When to use? The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations. This strategy works well when you're Bullish that the price of the underlying will not fall beyond a certain level.
Action Buy ITM Put Option, Sell OTM Put Option Sell Put Option
Breakeven Point Strike Price of Long Put - Net Premium Strike Price - Premium

BEAR PUT SPREAD Vs SHORT PUT - Risk & Reward

BEAR PUT SPREAD SHORT PUT
Maximum Profit Scenario Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid. Premium received in your account when you sell the Put Option.
Maximum Loss Scenario Max Loss = Net Premium Paid. Unlimited (When the price of the underlying falls.)
Risk Limited Unlimited
Reward Limited Limited

BEAR PUT SPREAD Vs SHORT PUT - Strategy Pros & Cons

BEAR PUT SPREAD SHORT PUT
Similar Strategies Bear Call Spread, Bull Call Spread Bull Put Spread, Short Starddle
Disadvantage • Limited profit. • Early assignment risk. • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply.
Advantages • If the strike price, expiration date or underlying stocks are rightly chosen then risk of losses would be limited to the net premium paid. • This strategy works well in declining markets. • Limited risk. • Benefit from time decay. • Less capital required than buying the stock outright. • Profit when underlying stock price rise, move sideways or drop by a relatively small account.

BEAR PUT SPREAD

SHORT PUT