Compare Strategies
| DIAGONAL BEAR PUT SPREAD | PROTECTIVE COLLAR | |
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| About Strategy |
Diagonal Bear Put SpreadWhen 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. |
Protective Collar Strategy This Strategy is implemented when the investor requires downside protection for the short - to medium term but at lower cost. Buying protective puts can be an expensive proposition and writing OTM calls can defray the cost of the puts quite substantially. Protective Collar is considered as bearish to neutral strategy. In this strategy risk and reward is both are limited. This .. |
DIAGONAL BEAR PUT SPREAD Vs PROTECTIVE COLLAR - Details
| DIAGONAL BEAR PUT SPREAD | PROTECTIVE COLLAR | |
|---|---|---|
| Market View | Bearish | Neutral |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put 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. | Purchase Price of Underlying + Net Premium Paid |
DIAGONAL BEAR PUT SPREAD Vs PROTECTIVE COLLAR - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | PROTECTIVE COLLAR | |
|---|---|---|
| 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 when the investor requires downside protection for the short - to medium term but at lower cost. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | • Short 1 Call Option, • Long 1 Put Option |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Purchase Price of Underlying + Net Premium Paid |
DIAGONAL BEAR PUT SPREAD Vs PROTECTIVE COLLAR - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | PROTECTIVE COLLAR | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | • Call strike - stock purchase price - net premium paid + net credit received |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | • Stock purchase price - put strike - net premium paid - put strike + net credit received |
| Risk | Limited | Limited |
| Reward | Limited | Limited |
DIAGONAL BEAR PUT SPREAD Vs PROTECTIVE COLLAR - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | PROTECTIVE COLLAR | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | Bull Put Spread, Bull Call Spread |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | • Potential profit is lower or limited. |
| Advantages | The Risk is limited. | The Risk is limited. |