Compare Strategies
RATIO CALL SPREAD | BEAR CALL SPREAD | |
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About Strategy |
Ratio Call Spread Option StrategyAs the name suggests, a ratio of 2:1 is followed i.e. buy 1 ITM Call and simultaneously sell OTM Calls double the number of ITM Calls (In this case 2). This strategy is used by trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited since he is |
Bear Call Spread Option StrategyBear Call Spread option trading strategy is used by a trader who is bearish in nature and expects the underlying asset to dip in the near future. This strategy includes buying of an ‘Out of the Money’ Call Option and selling one ‘In the Money’ Call Option of the same underlying asset and the same expiration date. When you write a call, you receive premium thereby r .. |
RATIO CALL SPREAD Vs BEAR CALL SPREAD - Details
RATIO CALL SPREAD | BEAR CALL SPREAD | |
---|---|---|
Market View | Neutral | Bearish |
Type (CE/PE) | CE (Call Option) | CE (Call Option) |
Number Of Positions | 3 | 2 |
Strategy Level | Beginners | Beginners |
Reward Profile | Limited | Limited |
Risk Profile | Unlimited | Limited |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + (Points of Maximum Profit / Number of Uncovered Calls), Lower Breakeven Point = Strike Price of Long Call +/- Net Premium Paid or Received | Strike Price of Short Call + Net Premium Received |
RATIO CALL SPREAD Vs BEAR CALL SPREAD - When & How to use ?
RATIO CALL SPREAD | BEAR CALL SPREAD | |
---|---|---|
Market View | Neutral | Bearish |
When to use? | This strategy is used by trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited since he is selling two calls. | This strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations. |
Action | Buy 1 ITM Call, Sell 2 OTM Calls | Buy OTM Call Option, Sell ITM Call Option |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + (Points of Maximum Profit / Number of Uncovered Calls), Lower Breakeven Point = Strike Price of Long Call +/- Net Premium Paid or Received | Strike Price of Short Call + Net Premium Received |
RATIO CALL SPREAD Vs BEAR CALL SPREAD - Risk & Reward
RATIO CALL SPREAD | BEAR CALL SPREAD | |
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Maximum Profit Scenario | Strike Price of Short Call - Strike Price of Long Call + Net Premium Received - Commissions Paid | Max Profit = Net Premium Received - Commissions Paid |
Maximum Loss Scenario | Price of Underlying - Strike Price of Short Calls - Max Profit + Commissions Paid | Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received |
Risk | Unlimited | Limited |
Reward | Limited | Limited |
RATIO CALL SPREAD Vs BEAR CALL SPREAD - Strategy Pros & Cons
RATIO CALL SPREAD | BEAR CALL SPREAD | |
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Similar Strategies | Variable Ratio Write | Bear Put Spread, Bull Call Spread |
Disadvantage | • Unlimited potential loss. • Complex strategy with limited profit. | • Limited amount of profit. • Margin requirement, more commission charges. |
Advantages | • Downside risk is almost zero. • Investors can book profit from share prices moving within given limits. • Trader can maximise profit when the share closes at the upper breakeven point. | • This strategy takes advantage of time decay. • Investors can get profit in a flat market scenario. • Investors can earn options premium income with a lower degree of risk. |