Compare Strategies
| STOCK REPAIR | THE COLLAR | |
|---|---|---|
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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 |
The Collar Option StrategyCollar Strategy is an extension to Covered Call Strategy. A trader, who is bullish in nature but has a very low risk appetite and wants to mitigate his risk will implement the Collar Strategy. Collar involves buying of stock in either Cash/Futures Market, buying an ATM Put Option & selling an OTM Call Option. The expiry dates of the op .. |
STOCK REPAIR Vs THE COLLAR - Details
| STOCK REPAIR | THE COLLAR | |
|---|---|---|
| Market View | Bullish | Bullish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) + Underlying |
| Number Of Positions | 3 | 3 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Price of Features - Call Premium + Put Premium |
STOCK REPAIR Vs THE COLLAR - When & How to use ?
| STOCK REPAIR | THE COLLAR | |
|---|---|---|
| Market View | Bullish | Bullish |
| 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. | It should be used only in case where trader is certain about the bearish market view. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Buy Underlying, Buy 1 ATM Put Option, Sell 1 OTM Call Option |
| Breakeven Point | Price of Features - Call Premium + Put Premium |
STOCK REPAIR Vs THE COLLAR - Risk & Reward
| STOCK REPAIR | THE COLLAR | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received | |
| Maximum Loss Scenario | Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs THE COLLAR - Strategy Pros & Cons
| STOCK REPAIR | THE COLLAR | |
|---|---|---|
| Similar Strategies | Call Spread, Bull Put Spread | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Limited profit. • A trader can book more profit without this strategy if the prices goes high. |
| 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. | • This strategy protects the losses on underlying asset. • Risk gets limited if the price of the stocks goes down. • Trader can get ownership benefits life dividend and voting rights. |