Compare Strategies
| STOCK REPAIR | SHORT CALL BUTTERFLY | |
|---|---|---|
|
|
|
| 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 |
Short Call Butterfly Option StrategyThis strategy is opposite of the Long Call Butterfly Strategy, a trader expects the market to remain range bound in Long Call Butterfly, but here he expects the market to move beyond strike boundaries in Short Call Butterfly. If the trader is bullish on the market’s volatility, he will implement this strategy. Here also there should be equal distance between the .. |
STOCK REPAIR Vs SHORT CALL BUTTERFLY - Details
| STOCK REPAIR | SHORT CALL BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) |
| Number Of Positions | 3 | 4 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium |
STOCK REPAIR Vs SHORT CALL BUTTERFLY - When & How to use ?
| STOCK REPAIR | SHORT CALL BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| 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. | This strategy is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Buy 2 ATM Call, Sell 1 ITM Call, Sell 1 OTM Call |
| Breakeven Point | Lower Break-even = Lower Strike Price + Net Premium, Upper Break-even = Higher Strike Price - Net Premium |
STOCK REPAIR Vs SHORT CALL BUTTERFLY - Risk & Reward
| STOCK REPAIR | SHORT CALL BUTTERFLY | |
|---|---|---|
| Maximum Profit Scenario | The profit is limited to the net premium received. | |
| Maximum Loss Scenario | Higher strike price- Lower Strike Price - Net Premium | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs SHORT CALL BUTTERFLY - Strategy Pros & Cons
| STOCK REPAIR | SHORT CALL BUTTERFLY | |
|---|---|---|
| Similar Strategies | Long Straddle, Long Call Butterfly | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Limited rewards, usually offer smaller return. • Profitability depends on the significant movement of stocks and options prices. |
| 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. | • Even if the market is highly volatile, the risk exposure remains limited. • Without any extra investment, you can receive your premium. • Able to book profits even when the price movement cannot be predicted. |