Comparision (DIAGONAL BULL CALL SPREAD
VS SHORT STRADDLE)
Compare Strategies
DIAGONAL BULL CALL SPREAD
SHORT STRADDLE
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.
This strategy is just the opposite of Long Straddle. A trader should adopt this strategy when he expects less volatility in the near future. Here, a trader will sell one Call Option & one Put Option of the same strike price, same expiry date and of the same underlying asset. If the stock/index hovers around the same levels then both the options will expire worthless an ..
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium
DIAGONAL BULL CALL SPREAD Vs SHORT STRADDLE - Risk & Reward
DIAGONAL BULL CALL SPREAD
SHORT STRADDLE
Maximum Profit Scenario
Max Profit = Net Premium Received - Commissions Paid
Maximum Loss Scenario
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Risk
Limited
Unlimited
Reward
Limited
Limited
DIAGONAL BULL CALL SPREAD Vs SHORT STRADDLE - Strategy Pros & Cons
DIAGONAL BULL CALL SPREAD
SHORT STRADDLE
Similar Strategies
Bull Put Spread
Short Strangle
Disadvantage
• Unlimited risk. • If the price of the underlying asset moves in either direction then huge losses can occur.
Advantages
• A trader can earn profit even when there is no volatility in the market . • Allows you to benefit from double time decay. • Trader can collect premium from puts and calls option .