Compare Strategies
| LONG GUTS | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Long Guts Option StrategyThis strategy is implemented by a trader when he is neutral on the movements and bullish on volatility i.e. he expects the stock to move in either direction with high magnitude. This strategy involves buying 1 ITM Call Option and 1 ITM Put Option. This strategy can be called as Debit Spread because trader’s account is debited at the time of entering the positions.< |
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 .. |
LONG GUTS Vs STOCK REPAIR - Details
| LONG GUTS | STOCK REPAIR | |
|---|---|---|
| Market View | Neutral | Bullish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) | CE (Call Option) |
| Number Of Positions | 2 | 3 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Unlimited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Net Premium Paid + Strike Price of Long Call, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid |
LONG GUTS Vs STOCK REPAIR - When & How to use ?
| LONG GUTS | STOCK REPAIR | |
|---|---|---|
| Market View | Neutral | Bullish |
| When to use? | This strategy is implemented by a trader when he is neutral on the movements and bullish on volatility i.e. he expects the stock to move in either direction with high magnitude. | 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 | Buy 1 ITM Call, Buy 1 ITM Put | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Upper Breakeven Point = Net Premium Paid + Strike Price of Long Call, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid |
LONG GUTS Vs STOCK REPAIR - Risk & Reward
| LONG GUTS | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | Price of Underlying - Strike Price of Long Call - Net Premium Paid OR Strike Price of Long Put - Price of Underlying - Premium Paid | |
| Maximum Loss Scenario | Net Premium Paid + Strike Price of Long Put - Strike Price of Long Call + Commissions Paid | |
| Risk | Limited | Limited |
| Reward | Unlimited | Unlimited |
LONG GUTS Vs STOCK REPAIR - Strategy Pros & Cons
| LONG GUTS | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Short Put Ladder, Strip, Strap | |
| Disadvantage | • More commission involved than simply buying call or put option. • Expensive. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | • Investors can get unlimited profit if the underlying asset goes up or down. • Ability to profit no matter if the market goes in either direction. • Limited loss. | • 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. |