This strategy is implemented by a trader when he is neutral – moderately bullish in the near-month contract and bullish in the mid-month contract. It involves sale of 1 Near-Month OTM Call Option and buying of 1 Mid Month ITM Call Option.
Strap Strategy is similar to Long Straddle, the only difference is the quantity traded. A trader will buy two Call Options and one Put Options. In this strategy, a trader is very bullish on the market and volatility on upside but wants to hedge himself in case the stock doesn’t perform as per his expectations. This strategy will make more profits compared to long straddle sin ..
Profit Achieved When Price of Underlying > Strike Price of Calls/Puts + (Net Premium Paid/2) OR Price of Underlying < Strike Price of Calls/Puts - Net Premium Paid
Risk Profile
Limited
Max Loss Occurs When Price of Underlying = Strike Price of Calls/Puts
Breakeven Point
Strike Price of Calls/Puts + (Net Premium Paid/2)
DIAGONAL BULL CALL SPREAD Vs STRAP - When & How to use ?
DIAGONAL BULL CALL SPREAD
STRAP
Market View
Bullish
Neutral
When to use?
This strategy is used when the investor is bullish on the stock and expects volatility in the near future.
• To generate profit, there should be significant change in share price. • Expensive strategy.
Advantages
• Limited loss. • If share prices are moving then traders can book unlimited profit. • A trader can still book profit if the underlying falls substantially.
