Compare Strategies
| DIAGONAL BULL CALL SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Diagonal Bull Call Spread Option StrategyThis strategy is implemented by a trader when he is neutral – moderately bullish in the near-month contract and bullish in the mid-month contract. It involves sale of 1 Near-Month OTM Call Option and buying of 1 Mid Month ITM Call Option. Risk:
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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. |
DIAGONAL BULL CALL SPREAD Vs DIAGONAL BEAR PUT SPREAD - Details
| DIAGONAL BULL CALL SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| 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. |
DIAGONAL BULL CALL SPREAD Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| DIAGONAL BULL CALL SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | 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 | |
| Action | Buy 1 Long-Term ITM Call Sell 1 Near-Term OTM Call | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
DIAGONAL BULL CALL SPREAD Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| DIAGONAL BULL CALL SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | |
| Risk | Limited | Limited |
| Reward | Limited | Limited |
DIAGONAL BULL CALL SPREAD Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| DIAGONAL BULL CALL SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Bull Put Spread | Bear Put Spread and Bear Call Spread |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | |
| Advantages | The Risk is limited. |