Comparision (NEUTRAL CALENDAR SPREAD
VS RATIO CALL WRITE)
Compare Strategies
NEUTRAL CALENDAR SPREAD
RATIO CALL WRITE
About Strategy
Neutral Calendar Spread Option strategy
This strategy is implemented if the trader is neutral in the near future for say 2 months or so. This strategy involves writing of Near Month 1 ATM Call Option and buying 1 Mid Month ATM Call Option, hence reducing the cost of purchase, with the same strike price of the same underlying asset. This strategy is used when the trader wants to make money from the
This strategy involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. 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. ..
NEUTRAL CALENDAR SPREAD Vs RATIO CALL WRITE - Details
NEUTRAL CALENDAR SPREAD
RATIO CALL WRITE
Market View
Neutral
Neutral
Type (CE/PE)
CE (Call Option)
CE (Call Option)
Number Of Positions
2
2
Strategy Level
Beginners
Beginners
Reward Profile
Limited
Limited
Risk Profile
Limited
Unlimited
Breakeven Point
-
Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit
NEUTRAL CALENDAR SPREAD Vs RATIO CALL WRITE - When & How to use ?
NEUTRAL CALENDAR SPREAD
RATIO CALL WRITE
Market View
Neutral
Neutral
When to use?
This strategy is implemented if the trader is neutral in the near future for say 2 months or so. This strategy involves writing of Near Month 1 ATM Call Option and buying 1 Mid Month ATM Call Option.
This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future.
Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit
NEUTRAL CALENDAR SPREAD Vs RATIO CALL WRITE - Risk & Reward
NEUTRAL CALENDAR SPREAD
RATIO CALL WRITE
Maximum Profit Scenario
Maximum Profit Limited When underlying stock price remains unchanged on expiration of the near month options.
Net Premium Received - Commissions Paid
Maximum Loss Scenario
It occurs when the stock price goes down and stays down until expiration of the longer term options.
Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid
Risk
Limited
Unlimited
Reward
Limited
Limited
NEUTRAL CALENDAR SPREAD Vs RATIO CALL WRITE - Strategy Pros & Cons
NEUTRAL CALENDAR SPREAD
RATIO CALL WRITE
Similar Strategies
Long Put Butterfly, Iron Butterfly
Variable Ratio Write
Disadvantage
• Lower profitability • Must have enough experience.
• Potential loss is higher than gain. • Limited profit.
Advantages
• Almost zero margin required. • Ability to profit from time decay, limited risk. • This strategy allows you to transform position into long position.