Compare Strategies
| DIAGONAL BEAR PUT SPREAD | LONG STRADDLE | |
|---|---|---|
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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. |
Long Straddle Option StrategyStraddle is neither bullish nor bearish strategy; it is a market neutral strategy. Here a trader wishes to take advantage of the volatility in the market. This strategy involves buying of one Call option and one Put option of the same strike price, same expiry date and of the same underlying asset. Now a trader is bound to make profits once stock moves in either direc .. |
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - Details
| DIAGONAL BEAR PUT SPREAD | LONG STRADDLE | |
|---|---|---|
| Market View | Bearish | Neutral |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Limited | Unlimited |
| 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. | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium |
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | LONG STRADDLE | |
|---|---|---|
| Market View | Bearish | Neutral |
| 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 | This options strategy is work well when and investor market view is bearish. The strategy minimizes your risk in the event of prime movements going against your expectations. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | Buy Call Option, Buy Put Option |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium |
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | LONG STRADDLE | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | Max profit is achieved when at one option is exercised. |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | Maximum Loss = Net Premium Paid |
| Risk | Limited | Limited |
| Reward | Limited | Unlimited |
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | LONG STRADDLE | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | Bear Put Spread |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | • There should be continuous movement of the stock and options price for this strategy to be profitable. • Time decay hurts long option if the strike price, expiration date or underlying stock are badly chosen. |
| Advantages | The Risk is limited. | • Unlimited potential beyond the breakeven point in either direction . • Book your profit from highly volatile stocks without determining the direction. • Limited risk, more profit. |