Compare Strategies
| LONG PUT | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Long Put Option StrategyThis strategy is implemented by buying 1 Put Option i.e. a single position, when the person is bearish on the market and expects the market to move downwards in the near future. |
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. |
LONG PUT Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG PUT | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 1 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Strike Price of Long Put - Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG PUT Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG PUT | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| When to use? | A long put option strategy works well when you're expecting the underlying asset to sharply decline or be volatile in near future. | 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 |
| Action | Buy Put Option | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Strike Price of Long Put - Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG PUT Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG PUT | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Profit = Strike Price of Long Put - Premium Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Max Loss = Premium Paid + Commissions Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
LONG PUT Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG PUT | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Protective Call, Short Put | Bear Put Spread and Bear Call Spread |
| Disadvantage | • 100% loss if strike price, expiration dates or underlying stocks are badly chosen. • Time decay. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Limited risk to the premium paid. • Less capital investment and more profit. • Unlimited profit potential with limited risk. | The Risk is limited. |