Compare Strategies
| LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Long Call Option StrategyThis is one of the basic strategies as it involves entering into one position i.e. buying the Call Option only. Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future. Risk:
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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. |
LONG CALL Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 1 | 2 |
| Strategy Level | Beginner Level | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Strike Price + Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG CALL Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish (Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.) | Bearish |
| When to use? | This strategy work when an investor expect the underlying instrument move in upward direction. | 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 | Buying Call option | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Strike price + Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG CALL Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Underlying Asset close above from the strike price on expiry. | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Premium Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
LONG CALL Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Protective Put | Bear Put Spread and Bear Call Spread |
| Disadvantage | • In this strategy, there is not protection against the underlying stock falling in value. • 100% loss if the strike price, expiration dates or underlying stocks are badly chosen. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock. | The Risk is limited. |