Compare Strategies
| LONG GUTS | DIAGONAL BEAR PUT SPREAD | |
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| About Strategy |
Long Guts Option StrategyThis strategy is implemented by a trader when he is neutral on the movements and bullish on volatility i.e. he expects the stock to move in either direction with high magnitude. This strategy involves buying 1 ITM Call Option and 1 ITM Put Option. This strategy can be called as Debit Spread because trader’s account is debited at the time of entering the positions.< |
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 GUTS Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG GUTS | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Net Premium Paid + Strike Price of Long Call, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG GUTS Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG GUTS | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | This strategy is implemented by a trader when he is neutral on the movements and bullish on volatility i.e. he expects the stock to move in either direction with high magnitude. | 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 | Buy 1 ITM Call, Buy 1 ITM Put | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Upper Breakeven Point = Net Premium Paid + Strike Price of Long Call, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG GUTS Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG GUTS | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Price of Underlying - Strike Price of Long Call - Net Premium Paid OR Strike Price of Long Put - Price of Underlying - Premium Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Net Premium Paid + Strike Price of Long Put - Strike Price of Long Call + Commissions Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
LONG GUTS Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG GUTS | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Short Put Ladder, Strip, Strap | Bear Put Spread and Bear Call Spread |
| Disadvantage | • More commission involved than simply buying call or put option. • Expensive. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Investors can get unlimited profit if the underlying asset goes up or down. • Ability to profit no matter if the market goes in either direction. • Limited loss. | The Risk is limited. |