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Comparision (DIAGONAL BEAR PUT SPREAD VS NEUTRAL CALENDAR SPREAD)

 

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  DIAGONAL BEAR PUT SPREAD NEUTRAL CALENDAR 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. 

Neutral Calendar Spread Option strategy 

This strategy is implemented if the trader is neutral in the near future for say 2 months or so. This strategy involves writing of Near Month 1 ATM Call Option and buying 1 Mid Month ATM Call Option, hence reducing the cost of purchase, with the same strike price of the same underlying asset. This strategy is used when the trader wants to make money from the ..
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DIAGONAL BEAR PUT SPREAD Vs NEUTRAL CALENDAR SPREAD - Details

DIAGONAL BEAR PUT SPREAD NEUTRAL CALENDAR SPREAD
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 Limited
Breakeven Point This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. -

DIAGONAL BEAR PUT SPREAD Vs NEUTRAL CALENDAR SPREAD - When & How to use ?

DIAGONAL BEAR PUT SPREAD NEUTRAL CALENDAR SPREAD
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 implemented if the trader is neutral in the near future for say 2 months or so. This strategy involves writing of Near Month 1 ATM Call Option and buying 1 Mid Month ATM Call Option.
Action Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option Sell 1 Near-Term ATM Call, Buy 1 Long-Term ATM Call
Breakeven Point This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. -

DIAGONAL BEAR PUT SPREAD Vs NEUTRAL CALENDAR SPREAD - Risk & Reward

DIAGONAL BEAR PUT SPREAD NEUTRAL CALENDAR SPREAD
Maximum Profit Scenario 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month Maximum Profit Limited When underlying stock price remains unchanged on expiration of the near month options.
Maximum Loss Scenario When the stock trades up above the long-term put strike price. It occurs when the stock price goes down and stays down until expiration of the longer term options.
Risk Limited Limited
Reward Limited Limited

DIAGONAL BEAR PUT SPREAD Vs NEUTRAL CALENDAR SPREAD - Strategy Pros & Cons

DIAGONAL BEAR PUT SPREAD NEUTRAL CALENDAR SPREAD
Similar Strategies Bear Put Spread and Bear Call Spread Long Put Butterfly, Iron Butterfly
Disadvantage Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. • Lower profitability • Must have enough experience.
Advantages The Risk is limited. • Almost zero margin required. • Ability to profit from time decay, limited risk. • This strategy allows you to transform position into long position.

DIAGONAL BEAR PUT SPREAD

NEUTRAL CALENDAR SPREAD