Comparision (DIAGONAL BEAR PUT SPREAD
VS RATIO CALL WRITE)
Compare Strategies
DIAGONAL BEAR PUT SPREAD
RATIO CALL WRITE
About Strategy
Diagonal Bear Put Spread
When the trader is neutral – bearish in the near-month and bearish in the mid-month, he will apply Diagonal Bear Put Spread. This strategy involves buying Mid-Month ITM Put Options and selling (short/write) equal number of Near-Month OTM Put Options, of the same underlying asset. This strategy bags limited rewards with limited risk.
This strategy involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. 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.
DIAGONAL BEAR PUT SPREAD Vs RATIO CALL WRITE - Details
DIAGONAL BEAR PUT SPREAD
RATIO CALL WRITE
Market View
Bearish
Neutral
Type (CE/PE)
PE (Put Option)
CE (Call Option)
Number Of Positions
2
2
Strategy Level
Beginners
Beginners
Reward Profile
Limited
Limited
Risk Profile
Limited
Unlimited
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit
DIAGONAL BEAR PUT SPREAD Vs RATIO CALL WRITE - When & How to use ?
DIAGONAL BEAR PUT SPREAD
RATIO CALL WRITE
Market View
Bearish
Neutral
When to use?
When the trader is neutral – bearish in the near-month and bearish in the mid-month, he will apply Diagonal Bear Put Spread. This strategy involves buying Mid-Month ITM Put Options and selling (short/write) equal number of Near-Month OTM Put Options, of the same underlying asset
This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future.
Action
Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option
Sell 2 ATM Calls
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit
DIAGONAL BEAR PUT SPREAD Vs RATIO CALL WRITE - Risk & Reward
DIAGONAL BEAR PUT SPREAD
RATIO CALL WRITE
Maximum Profit Scenario
'Premiums received - Initial premium to execute + Strike price - Stock Price on final month
Net Premium Received - Commissions Paid
Maximum Loss Scenario
When the stock trades up above the long-term put strike price.
Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid
Risk
Limited
Unlimited
Reward
Limited
Limited
DIAGONAL BEAR PUT SPREAD Vs RATIO CALL WRITE - Strategy Pros & Cons
DIAGONAL BEAR PUT SPREAD
RATIO CALL WRITE
Similar Strategies
Bear Put Spread and Bear Call Spread
Variable Ratio Write
Disadvantage
Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads.
• Potential loss is higher than gain. • Limited profit.
