Compare Strategies
| STOCK REPAIR | COVERED COMBINATION | |
|---|---|---|
|
|
|
| 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 |
Covered Combination Option StrategyThis strategy involves selling OTM Call & Put Options and buying the underlying asset in either cash or futures market. It is also known as Covered Strangle as the profits are capped and risk is potentially unlimited. Risk: Un .. |
STOCK REPAIR Vs COVERED COMBINATION - Details
| STOCK REPAIR | COVERED COMBINATION | |
|---|---|---|
| Market View | Bullish | Bullish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | (Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2 |
STOCK REPAIR Vs COVERED COMBINATION - When & How to use ?
| STOCK REPAIR | COVERED COMBINATION | |
|---|---|---|
| Market View | Bullish | Bullish |
| 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 mainly suited for investors who are moderately bullish on a stock and are comfortable with increasing their position in the event of a price decline. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell 1 OTM Call, Sell 1 OTM Put |
| Breakeven Point | (Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2 |
STOCK REPAIR Vs COVERED COMBINATION - Risk & Reward
| STOCK REPAIR | COVERED COMBINATION | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Purchase Price of Underlying + Strike Price of Short Put - (2 x Price of Underlying) - Max Profit + Commissions Paid | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs COVERED COMBINATION - Strategy Pros & Cons
| STOCK REPAIR | COVERED COMBINATION | |
|---|---|---|
| Similar Strategies | Stock Repair Strategy | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | Combinations can be profitable in sideways or rising markets. Greater combined net credit increases downside protection and potential return. |
| 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. | Limited Maximum Profit on the upside. Covered Combinations should only be traded on stocks that are bullish. |