Compare Strategies
| SHORT CALL | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Short Call Option StrategyA trader shorts or writes a Call Option when he feels that underlying stock price is likely to go down. Selling Call Option is a strategy preferred for experienced traders. However this strategy is very risky in nature. If the stock rallies on the upside, your risk becomes potentially unquantifiable and unlimited. If the 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 .. |
SHORT CALL Vs STOCK REPAIR - Details
| SHORT CALL | STOCK REPAIR | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) |
| Number Of Positions | 1 | 3 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | Unlimited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Strike Price of Short Call + Premium Received |
SHORT CALL Vs STOCK REPAIR - When & How to use ?
| SHORT CALL | STOCK REPAIR | |
|---|---|---|
| Market View | Bearish | Bullish |
| When to use? | It is an aggressive strategy and involves huge risks. It should be used only in case where trader is certain about the bearish market view on the underlying. | 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. |
| Action | Sell or Write Call Option | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Strike Price of Short Call + Premium Received |
SHORT CALL Vs STOCK REPAIR - Risk & Reward
| SHORT CALL | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | Max Profit = Premium Received | |
| Maximum Loss Scenario | Loss Occurs When Price of Underlying > Strike Price of Short Call + Premium Received | |
| Risk | Unlimited | Limited |
| Reward | Limited | Unlimited |
SHORT CALL Vs STOCK REPAIR - Strategy Pros & Cons
| SHORT CALL | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Covered Put, Covered Calls | |
| Disadvantage | • Unlimited risk to the upside underlying stocks. • Potential loss more than the premium collected. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | • With the help of this strategy, traders can book profit from falling prices in the underlying asset. • Less investment, more profit. • Traders can book profit when underlying stock price fall, move sideways or rise by a small amount. | • 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. |