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Comparision (RISK REVERSAL VS LONG CALL LADDER)

 

Compare Strategies

  RISK REVERSAL LONG CALL LADDER
About Strategy

Risk Reversal Option Strategy

This strategy protects an investor from unfavourable price movements in the position but limits the profits can be made on that position. A risk reversal is a hedging strategy that protects a long or short position by using put and call options. In this one option is buying and other is written. In this strategy the trader has to pay a premium, while the written option prod

Long Call Ladder Option Strategy 

Long Call Ladder Strategy is an extension to Bull Call Spread Strategy. A trader will be slightly bullish about the market, in this strategy but bearish over volatility. It involves buying of an ITM Call Option and sale of 1 ATM & 1 OTM Call Options. However, the risk associated with this strategy is unlimited and reward is limited.

RISK REVERSAL Vs LONG CALL LADDER - Details

RISK REVERSAL LONG CALL LADDER
Market View Bullish Neutral
Type (CE/PE) CE (Call Option) + PE (Put Option) CE (Call Option)
Number Of Positions 2 3
Strategy Level Advance Advance
Reward Profile Unlimited Unlimited
Risk Profile Unlimited Unlimited
Breakeven Point Premium received - Put Strike Price Upper Breakeven Point = Total Strike Prices of Short Calls - Strike Price of Long Call - Net Premium Paid, Lower Breakeven Point = Strike Price of Long Call + Net Premium Paid

RISK REVERSAL Vs LONG CALL LADDER - When & How to use ?

RISK REVERSAL LONG CALL LADDER
Market View Bullish Neutral
When to use? This strategy can be used for hedging. When an investor want to protect long or short position by using a call and put option. This Strategy is an extension to Bull Call Spread Strategy. A trader will be slightly bullish about the market, in this strategy but bearish over volatility.
Action This strategy work when an investor want to hedge their position by buying a put option and selling a call option. Buy 1 ITM Call, Sell 1 ATM Call, Sell 1 OTM Call
Breakeven Point Premium received - Put Strike Price Upper Breakeven Point = Total Strike Prices of Short Calls - Strike Price of Long Call - Net Premium Paid, Lower Breakeven Point = Strike Price of Long Call + Net Premium Paid

RISK REVERSAL Vs LONG CALL LADDER - Risk & Reward

RISK REVERSAL LONG CALL LADDER
Maximum Profit Scenario You have unlimited profit potential to the upside. Strike Price of Lower Strike Short Call - Strike Price of Long Call - Net Premium Paid - Commissions Paid
Maximum Loss Scenario You have nearly unlimited downside risk as well because you are short the put Price of Underlying - Upper Breakeven Price + Commissions Paid
Risk Unlimited Unlimited
Reward Unlimited Unlimited

RISK REVERSAL Vs LONG CALL LADDER - Strategy Pros & Cons

RISK REVERSAL LONG CALL LADDER
Similar Strategies - Short Strangle (Sell Strangle), Short Straddle (Sell Straddle)
Disadvantage Unlimited Risk. • Unlimited risk. • Margin required.
Advantages Unlimited profit. • Reduces capital outlay of bull call spread. • Wider maximum profit zone. • When there is decrease in implied volatility, this strategy can give profit.

RISK REVERSAL

LONG CALL LADDER