Compare Strategies
| DIAGONAL BEAR PUT SPREAD | PUT BACKSPREAD | |
|---|---|---|
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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. |
Put Backspread Option StrategyIf the trader is bearish on market and bullish in volatility, he will implement this strategy. However the trader can be neutral in nature i.e. indifferent if the market moves in either of the direction, this strategy will make profits, but uptrend will give a capped income than downtrend which will give unlimited returns. |
DIAGONAL BEAR PUT SPREAD Vs PUT BACKSPREAD - Details
| DIAGONAL BEAR PUT SPREAD | PUT BACKSPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Limited | |
| Risk Profile | 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 PUT BACKSPREAD - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | PUT BACKSPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| 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 | |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | |
| 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 PUT BACKSPREAD - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | PUT BACKSPREAD | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | |
| Risk | Limited | Limited |
| Reward | Limited | Unlimited |
DIAGONAL BEAR PUT SPREAD Vs PUT BACKSPREAD - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | PUT BACKSPREAD | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | |
| Advantages | The Risk is limited. |