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.
Long Combo Option Trading Strategy is implemented when a trader is bullish in nature and expects the stock price to rise in the near future. Here a trader will sell one ‘Out of the Money’ Put Option and buy one ‘Out of the Money’ Call Option. This trade will require less capital to implement since the amount required to buy the call will be covered by the amount received ..
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 when an investor Bullish on an underlying but don't have the required capital or the risk appetite to invest directly into it.
Action
Buy 1 ATM Call, Sell 2 OTM Calls
Sell OTM Put Option, Buy OTM Call Option
Breakeven Point
Call Strike + Net Premium
STOCK REPAIR Vs LONG COMBO - Risk & Reward
STOCK REPAIR
LONG COMBO
Maximum Profit Scenario
Underlying asset goes up and Call option exercised
Maximum Loss Scenario
Underlying asset goes down and Put option exercised
Risk
Limited
Unlimited
Reward
Unlimited
Unlimited
STOCK REPAIR Vs LONG COMBO - Strategy Pros & Cons
STOCK REPAIR
LONG COMBO
Similar Strategies
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Disadvantage
• Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged.
• Losses can keep on increasing as the price of stock goes down. • High risk strategy.
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.
• Capital investment is low and returns are high. • Unlimited reward, returns keep on increasing with the increase on stock price. • Leverage facility provided by this strategy is very beneficial.
