Compare Strategies
| STOCK REPAIR | RATIO PUT SPREAD | |
|---|---|---|
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| About Strategy |
Stock Repair Option StrategyStock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery. Suppose Mr. X has |
Ratio Put Spread Option StrategyThis strategy involves buying ITM Puts and simultaneously selling OTM Puts, double the number of ITM Puts. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited. |
STOCK REPAIR Vs RATIO PUT SPREAD - Details
| STOCK REPAIR | RATIO PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 3 | 3 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts) |
STOCK REPAIR Vs RATIO PUT SPREAD - When & How to use ?
| STOCK REPAIR | RATIO PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Neutral |
| When to use? | Stock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery. | This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Buy 1 ITM Put, Sell 2 OTM Puts |
| Breakeven Point | Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts) |
STOCK REPAIR Vs RATIO PUT SPREAD - Risk & Reward
| STOCK REPAIR | RATIO PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Long Put - Strike Price of Short Put + Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Strike Price of Short - Price of Underlying - Max Profit + Commissions Paid | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs RATIO PUT SPREAD - Strategy Pros & Cons
| STOCK REPAIR | RATIO PUT SPREAD | |
|---|---|---|
| Similar Strategies | Short Straddle (Sell Straddle), Short Strangle (Sell Strangle) | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Unlimited potential risk. • Limited profit. |
| Advantages | • This strategy creates an opportunity to recover losses by lowering our breakeven. • No margin required. • No additional downside risk and costs nothing to put on. | • Directional strategy so that there is either no upside or downside risk. • Able to profit even if trader is neutral on the market. • Higher probability of profit. |