Compare Strategies
| LONG COMBO | DIAGONAL BEAR PUT SPREAD | |
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| About Strategy |
Long Combo Option StrategyLong 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 |
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 COMBO Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG COMBO | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Call Strike + Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG COMBO Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG COMBO | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| When to use? | 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. | 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 | Sell OTM Put Option, Buy OTM Call Option | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Call Strike + Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG COMBO Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG COMBO | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Underlying asset goes up and Call option exercised | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Underlying asset goes down and Put option exercised | When the stock trades up above the long-term put strike price. |
| Risk | Unlimited | Limited |
| Reward | Unlimited | Limited |
LONG COMBO Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG COMBO | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | - | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Losses can keep on increasing as the price of stock goes down. • High risk strategy. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • 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. | The Risk is limited. |