Comparision (RATIO PUT SPREAD
VS REVERSE IRON CONDOR)
Compare Strategies
RATIO PUT SPREAD
REVERSE IRON CONDOR
About Strategy
Ratio Put Spread Option Strategy
This strategy involves buying ITM Puts and simultaneously selling OTM Puts, double the number of ITM Puts. This strategy is used by a trader who is 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.
Reverse Iron Condor as the name suggests is the opposite of Iron Condors. In Reverse Iron Condor, a trader is bullish about volatility and expects the market to make a significant move in the near future in either direction. Here a trader will buy 1 OTM Call Option, sell 1 Deep OTM Call Option, buy 1 OTM Put Option, sell 1 Deep OTM Put Option. This strategy also ..
Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts)
Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid
RATIO PUT SPREAD Vs REVERSE IRON CONDOR - When & How to use ?
RATIO PUT SPREAD
REVERSE IRON CONDOR
Market View
Neutral
Neutral
When to use?
This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future.
In Reverse Iron Condor, a trader is bullish about volatility and expects the market to make a significant move in the near future in either direction
Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts)
Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid
RATIO PUT SPREAD Vs REVERSE IRON CONDOR - Risk & Reward
RATIO PUT SPREAD
REVERSE IRON CONDOR
Maximum Profit Scenario
Strike Price of Long Put - Strike Price of Short Put + Net Premium Received - Commissions Paid
Strike Price of Short Call (or Long Put) - Strike Price of Long Call (or Short Put) - Net Premium Paid - Commissions Paid
Maximum Loss Scenario
Strike Price of Short - Price of Underlying - Max Profit + Commissions Paid
Net Premium Paid + Commissions Paid
Risk
Unlimited
Limited
Reward
Limited
Limited
RATIO PUT SPREAD Vs REVERSE IRON CONDOR - Strategy Pros & Cons
RATIO PUT SPREAD
REVERSE IRON CONDOR
Similar Strategies
Short Straddle (Sell Straddle), Short Strangle (Sell Strangle)
Short Condor
Disadvantage
• Unlimited potential risk. • Limited profit.
• Potential loss is higher than gain. • Limited profit.
Advantages
• Directional strategy so that there is either no upside or downside risk. • Able to profit even if trader is neutral on the market. • Higher probability of profit.
• Able to profit whether stocks move in either direction up or down. • This strategy can be used by option traders who cannot use credit spreads. • Predictable maximum loss and profits.