Compare Strategies
| DIAGONAL BEAR PUT SPREAD | SHORT CALL | |
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| About Strategy |
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. |
Short Call Option StrategyA trader shorts or writes a Call Option when he feels that underlying stock price is likely to go down. Selling Call Option is a strategy preferred for experienced traders. However this strategy is very risky in nature. If the stock rallies on the upside, your risk becomes potentially unquantifiable and unlimited. If the strategy .. |
DIAGONAL BEAR PUT SPREAD Vs SHORT CALL - Details
| DIAGONAL BEAR PUT SPREAD | SHORT CALL | |
|---|---|---|
| Market View | Bearish | Bearish |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) |
| Number Of Positions | 2 | 1 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Limited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Strike Price of Short Call + Premium Received |
DIAGONAL BEAR PUT SPREAD Vs SHORT CALL - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | SHORT CALL | |
|---|---|---|
| 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 | It is an aggressive strategy and involves huge risks. It should be used only in case where trader is certain about the bearish market view on the underlying. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | Sell or Write Call 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 Short Call + Premium Received |
DIAGONAL BEAR PUT SPREAD Vs SHORT CALL - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | SHORT CALL | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | Max Profit = Premium Received |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | Loss Occurs When Price of Underlying > Strike Price of Short Call + Premium Received |
| Risk | Limited | Unlimited |
| Reward | Limited | Limited |
DIAGONAL BEAR PUT SPREAD Vs SHORT CALL - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | SHORT CALL | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | Covered Put, Covered Calls |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | • Unlimited risk to the upside underlying stocks. • Potential loss more than the premium collected. |
| Advantages | The Risk is limited. | • With the help of this strategy, traders can book profit from falling prices in the underlying asset. • Less investment, more profit. • Traders can book profit when underlying stock price fall, move sideways or rise by a small amount. |