Compare Strategies
| STOCK REPAIR | SHORT STRADDLE | |
|---|---|---|
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| About Strategy |
Stock Repair Option StrategyStock 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. Suppose Mr. X has |
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 .. |
STOCK REPAIR Vs SHORT STRADDLE - Details
| STOCK REPAIR | SHORT STRADDLE | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium |
STOCK REPAIR Vs SHORT STRADDLE - When & How to use ?
| STOCK REPAIR | SHORT STRADDLE | |
|---|---|---|
| Market View | Bullish | Neutral |
| When to use? | 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 work well when an investor expect a flat market in the coming days with very less movement in the prices of underlying asset. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell Call Option, Sell Put Option |
| Breakeven Point | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium |
STOCK REPAIR Vs SHORT STRADDLE - Risk & Reward
| STOCK REPAIR | SHORT STRADDLE | |
|---|---|---|
| Maximum Profit Scenario | Max Profit = Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs SHORT STRADDLE - Strategy Pros & Cons
| STOCK REPAIR | SHORT STRADDLE | |
|---|---|---|
| Similar Strategies | Short Strangle | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Unlimited risk. • If the price of the underlying asset moves in either direction then huge losses can occur. |
| 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. | • 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 . |