Compare Strategies
| CALL BACKSPREAD | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Call Backspread Option Trading This strategy is adopted by traders who are bullish in nature. He expects market and volatility to rise in the near future. A trader need not be direction specific here (i.e. an upward or downward trend, but a small bias towards an uptrend should always be present, as the gains will be much higher once the market moves up r |
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 .. |
CALL BACKSPREAD Vs STOCK REPAIR - Details
| CALL BACKSPREAD | STOCK REPAIR | |
|---|---|---|
| Market View | Bullish | Bullish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) |
| Number Of Positions | 3 | 3 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Unlimited | Unlimited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
CALL BACKSPREAD Vs STOCK REPAIR - When & How to use ?
| CALL BACKSPREAD | STOCK REPAIR | |
|---|---|---|
| Market View | Bullish | Bullish |
| When to use? | This strategy is used when the investor expects the price of the stock to rise in the future. | 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. |
| Action | Sell 1 ITM Call, BUY 2 OTM Call | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
CALL BACKSPREAD Vs STOCK REPAIR - Risk & Reward
| CALL BACKSPREAD | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | Unlimited profit potential if the stock goes in upward direction. | |
| Maximum Loss Scenario | Strike Price of long call - Strike Price of short call - Net premium received | |
| Risk | Limited | Limited |
| Reward | Unlimited | Unlimited |
CALL BACKSPREAD Vs STOCK REPAIR - Strategy Pros & Cons
| CALL BACKSPREAD | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | - | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | |
| Advantages | • Unlimited profit potential. | • 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. |