Compare Strategies
| STOCK REPAIR | RATIO CALL WRITE | |
|---|---|---|
|
|
|
| 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 |
Ratio Call Write Option StrategyThis strategy involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited.
|
STOCK REPAIR Vs RATIO CALL WRITE - Details
| STOCK REPAIR | RATIO CALL WRITE | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit |
STOCK REPAIR Vs RATIO CALL WRITE - When & How to use ?
| STOCK REPAIR | RATIO CALL WRITE | |
|---|---|---|
| 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 used by a trader who is neutral on the market and bearish on the volatility in the near future. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell 2 ATM Calls |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit |
STOCK REPAIR Vs RATIO CALL WRITE - Risk & Reward
| STOCK REPAIR | RATIO CALL WRITE | |
|---|---|---|
| Maximum Profit Scenario | Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs RATIO CALL WRITE - Strategy Pros & Cons
| STOCK REPAIR | RATIO CALL WRITE | |
|---|---|---|
| Similar Strategies | Variable Ratio Write | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Potential loss is higher than gain. • Limited profit. |
| 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. |