Comparision (DIAGONAL BEAR PUT SPREAD
VS SYNTHETIC LONG CALL)
Compare Strategies
DIAGONAL BEAR PUT SPREAD
SYNTHETIC LONG CALL
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.
A trader is bullish in nature for short term, but also fearful about the downside risk associated with it. Here, a trader wants to hold an underlying asset either in physical form like in case of commodities or demat (electronic) form in case of stocks. But he is always exposed to downside risk and in order to mitigate his losses, ..
DIAGONAL BEAR PUT SPREAD Vs SYNTHETIC LONG CALL - Details
DIAGONAL BEAR PUT SPREAD
SYNTHETIC LONG CALL
Market View
Bearish
Bullish
Type (CE/PE)
PE (Put Option)
CE (Call Option)
Number Of Positions
2
2
Strategy Level
Beginners
Beginners
Reward Profile
Limited
When Price of Underlying > Purchase Price of Underlying + Premium Paid
Risk Profile
Limited
Limited (Maximum loss happens when the price of instrument move above from the strike price of put)
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Underlying Price + Put Premium
DIAGONAL BEAR PUT SPREAD Vs SYNTHETIC LONG CALL - When & How to use ?
DIAGONAL BEAR PUT SPREAD
SYNTHETIC LONG CALL
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
A trader is bullish in nature for short term, but also fearful about the downside risk associated with it.
Action
Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option
Buy 1 ATM Put or OTM Put
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Underlying Price + Put Premium
DIAGONAL BEAR PUT SPREAD Vs SYNTHETIC LONG CALL - Risk & Reward
DIAGONAL BEAR PUT SPREAD
SYNTHETIC LONG CALL
Maximum Profit Scenario
'Premiums received - Initial premium to execute + Strike price - Stock Price on final month
Current Price - Purchase Price - Premium Paid
Maximum Loss Scenario
When the stock trades up above the long-term put strike price.
Premium Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
DIAGONAL BEAR PUT SPREAD Vs SYNTHETIC LONG CALL - Strategy Pros & Cons
DIAGONAL BEAR PUT SPREAD
SYNTHETIC LONG CALL
Similar Strategies
Bear Put Spread and Bear Call Spread
Protective Put, Long Call
Disadvantage
Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads.
•Chances of loss if the underlying goes down. •Incur losses if option is exercised.
Advantages
The Risk is limited.
•Limited risk, unlimited profit. •Protection to your long-term holdings. • Limited loss to the to the premium paid for Put option.
