Compare Strategies
| DIAGONAL BEAR PUT SPREAD | RISK REVERSAL | |
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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. |
Risk Reversal Option StrategyThis 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 .. |
DIAGONAL BEAR PUT SPREAD Vs RISK REVERSAL - Details
| DIAGONAL BEAR PUT SPREAD | RISK REVERSAL | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Limited | Unlimited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Premium received - Put Strike Price |
DIAGONAL BEAR PUT SPREAD Vs RISK REVERSAL - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | RISK REVERSAL | |
|---|---|---|
| Market View | Bearish | Bullish |
| 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 strategy can be used for hedging. When an investor want to protect long or short position by using a call and put option. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | This strategy work when an investor want to hedge their position by buying a put option and selling a call option. |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Premium received - Put Strike Price |
DIAGONAL BEAR PUT SPREAD Vs RISK REVERSAL - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | RISK REVERSAL | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | You have unlimited profit potential to the upside. |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | You have nearly unlimited downside risk as well because you are short the put |
| Risk | Limited | Unlimited |
| Reward | Limited | Unlimited |
DIAGONAL BEAR PUT SPREAD Vs RISK REVERSAL - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | RISK REVERSAL | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | - |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | Unlimited Risk. |
| Advantages | The Risk is limited. | Unlimited profit. |