Comparision (DIAGONAL BEAR PUT SPREAD
VS BULL CALENDER SPREAD )
Compare Strategies
DIAGONAL BEAR PUT SPREAD
BULL CALENDER SPREAD
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 is implemented when a trader is bullish on the underlying stock/index in the short term say 2 months or so. A trader will write one Near Month OTM Call Option and buy one next Month OTM Call Option, thereby reducing the cost of purchase, with the same strike price of the same underlying asset. This strategy is used when a trader wants to make prof ..
DIAGONAL BEAR PUT SPREAD Vs BULL CALENDER SPREAD - Details
DIAGONAL BEAR PUT SPREAD
BULL CALENDER SPREAD
Market View
Bearish
Bullish
Type (CE/PE)
PE (Put Option)
CE (Call Option) + PE (Put Option)
Number Of Positions
2
2
Strategy Level
Beginners
Beginners
Reward Profile
Limited
Unlimited
Risk Profile
Limited
Limited
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Stock Price when long call value is equal to net debit.
DIAGONAL BEAR PUT SPREAD Vs BULL CALENDER SPREAD - When & How to use ?
DIAGONAL BEAR PUT SPREAD
BULL CALENDER SPREAD
Market View
Bearish
Bullish
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 when a trader wants to make profit from a steady increase in the stock price over a short period of time.
Action
Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Stock Price when long call value is equal to net debit.
DIAGONAL BEAR PUT SPREAD Vs BULL CALENDER SPREAD - Risk & Reward
DIAGONAL BEAR PUT SPREAD
BULL CALENDER SPREAD
Maximum Profit Scenario
'Premiums received - Initial premium to execute + Strike price - Stock Price on final month
You have unlimited profit potential to the upside.
Maximum Loss Scenario
When the stock trades up above the long-term put strike price.
Max Loss = Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
DIAGONAL BEAR PUT SPREAD Vs BULL CALENDER SPREAD - Strategy Pros & Cons
DIAGONAL BEAR PUT SPREAD
BULL CALENDER SPREAD
Similar Strategies
Bear Put Spread and Bear Call Spread
The Collar, Bull Put Spread
Disadvantage
Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads.
• Limited profit even if underlying asset rallies. • If the short call options are assigned when the underlying asset rallies then losses can be sustained.
Advantages
The Risk is limited.
• Limited losses to the net debit. • Enable trader to book profit even if underlying asset stays stagnant. • If the market trends reverse, cashing in from stock price movement at limited risk.
