Compare Strategies
| DIAGONAL BEAR PUT SPREAD | SHORT STRADDLE | |
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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 Straddle Option strategyThis strategy is just the opposite of Long Straddle. A trader should adopt this strategy when he expects less volatility in the near future. Here, a trader will sell one Call Option & one Put Option of the same strike price, same expiry date and of the same underlying asset. If the stock/index hovers around the same levels then both the options will expire worthless an .. |
DIAGONAL BEAR PUT SPREAD Vs SHORT STRADDLE - Details
| DIAGONAL BEAR PUT SPREAD | SHORT STRADDLE | |
|---|---|---|
| Market View | Bearish | Neutral |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Advance |
| 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. | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium |
DIAGONAL BEAR PUT SPREAD Vs SHORT STRADDLE - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | SHORT STRADDLE | |
|---|---|---|
| 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 work well when an investor expect a flat market in the coming days with very less movement in the prices of underlying asset. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | Sell Call Option, Sell Put Option |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium |
DIAGONAL BEAR PUT SPREAD Vs SHORT STRADDLE - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | SHORT STRADDLE | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | Max Profit = Net Premium Received - Commissions Paid |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received |
| Risk | Limited | Unlimited |
| Reward | Limited | Limited |
DIAGONAL BEAR PUT SPREAD Vs SHORT STRADDLE - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | SHORT STRADDLE | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | Short Strangle |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | • Unlimited risk. • If the price of the underlying asset moves in either direction then huge losses can occur. |
| Advantages | The Risk is limited. | • A trader can earn profit even when there is no volatility in the market . • Allows you to benefit from double time decay. • Trader can collect premium from puts and calls option . |