Compare Strategies
| DIAGONAL BEAR PUT SPREAD | SHORT GUTS | |
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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. |
Short Guts Option StrategyThis strategy is implemented by a trader when he is neutral on the movements and bearish on volatility i.e. he expects the stock to be range bound in the near future. This strategy involves sale of 1 ITM Call Option and 1 ITM Put Option. This strategy can be called as Credit Spread since his account is credited at the time of entering in the positions. < .. |
DIAGONAL BEAR PUT SPREAD Vs SHORT GUTS - Details
| DIAGONAL BEAR PUT SPREAD | SHORT GUTS | |
|---|---|---|
| Market View | Bearish | Neutral |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Upper Breakeven Point = Net Premium Received + Strike Price of Short Call, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received |
DIAGONAL BEAR PUT SPREAD Vs SHORT GUTS - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | SHORT GUTS | |
|---|---|---|
| Market View | Bearish | Neutral |
| 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 | This strategy is implemented by a trader when he is neutral on the movements and bearish on volatility i.e. he expects the stock to be range bound in the near future. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | Sell 1 ITM Call, Sell 1 ITM Put |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Upper Breakeven Point = Net Premium Received + Strike Price of Short Call, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received |
DIAGONAL BEAR PUT SPREAD Vs SHORT GUTS - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | SHORT GUTS | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | Net Premium Received + Strike Price of Short Put - Strike Price of Short Call - Commissions Paid |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | Price of Underlying - Strike Price of Short Call - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid |
| Risk | Limited | Unlimited |
| Reward | Limited | Limited |
DIAGONAL BEAR PUT SPREAD Vs SHORT GUTS - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | SHORT GUTS | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | Short Strangle (Sell Strangle), Short Straddle (Sell Straddle) |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | • Unlimited potential loss if the underlying stock continues to move in one direction. • High margin required. |
| Advantages | The Risk is limited. | • Ability to profit even when underlying asset stays stagnant. • You are already paid your full profit the moment the position is put on as this is a credit spread position. • Higher chance of ending in full profit as compared to short strangle or short straddle. |