Comparision (DIAGONAL BEAR PUT SPREAD
VS BEAR PUT SPREAD)
Compare Strategies
DIAGONAL BEAR PUT SPREAD
BEAR PUT SPREAD
About Strategy
Diagonal Bear Put Spread
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. This strategy bags limited rewards with limited risk.
When a trader is moderately bearish on the market he can implement this strategy. Bear-Put-Spread involves buying of ITM Put Option and selling of an OTM Put Option. If prices fall, the ITM Put option starts making profits and the OTM Put option also adds to profit at a certain extent if the expiry price stays above the OTM strike. However, if it falls below the OTM ..
DIAGONAL BEAR PUT SPREAD Vs BEAR PUT SPREAD - Details
DIAGONAL BEAR PUT SPREAD
BEAR PUT SPREAD
Market View
Bearish
Bearish
Type (CE/PE)
PE (Put Option)
PE (Put Option)
Number Of Positions
2
2
Strategy Level
Beginners
Advance
Reward Profile
Limited
Limited
Risk Profile
Limited
Limited
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Strike Price of Long Put - Net Premium
DIAGONAL BEAR PUT SPREAD Vs BEAR PUT SPREAD - When & How to use ?
DIAGONAL BEAR PUT SPREAD
BEAR PUT SPREAD
Market View
Bearish
Bearish
When to use?
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
The bear call spread options 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
Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option
Buy ITM Put Option, Sell OTM Put Option
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Strike Price of Long Put - Net Premium
DIAGONAL BEAR PUT SPREAD Vs BEAR PUT SPREAD - Risk & Reward
DIAGONAL BEAR PUT SPREAD
BEAR PUT SPREAD
Maximum Profit Scenario
'Premiums received - Initial premium to execute + Strike price - Stock Price on final month
Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid.
Maximum Loss Scenario
When the stock trades up above the long-term put strike price.
Max Loss = Net Premium Paid.
Risk
Limited
Limited
Reward
Limited
Limited
DIAGONAL BEAR PUT SPREAD Vs BEAR PUT SPREAD - Strategy Pros & Cons
DIAGONAL BEAR PUT SPREAD
BEAR PUT SPREAD
Similar Strategies
Bear Put Spread and Bear Call Spread
Bear Call Spread, Bull Call Spread
Disadvantage
Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads.
• Limited profit. • Early assignment risk.
Advantages
The Risk is limited.
• If the strike price, expiration date or underlying stocks are rightly chosen then risk of losses would be limited to the net premium paid. • This strategy works well in declining markets. • Limited risk.
