Compare Strategies
| STOCK REPAIR | SHORT CALL | |
|---|---|---|
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| 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 Option StrategyA trader shorts or writes a Call Option when he feels that underlying stock price is likely to go down. Selling Call Option is a strategy preferred for experienced traders. However this strategy is very risky in nature. If the stock rallies on the upside, your risk becomes potentially unquantifiable and unlimited. If the strategy .. |
STOCK REPAIR Vs SHORT CALL - Details
| STOCK REPAIR | SHORT CALL | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) |
| Number Of Positions | 3 | 1 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | Strike Price of Short Call + Premium Received |
STOCK REPAIR Vs SHORT CALL - When & How to use ?
| STOCK REPAIR | SHORT CALL | |
|---|---|---|
| Market View | Bullish | Bearish |
| 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. | It is an aggressive strategy and involves huge risks. It should be used only in case where trader is certain about the bearish market view on the underlying. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell or Write Call Option |
| Breakeven Point | Strike Price of Short Call + Premium Received |
STOCK REPAIR Vs SHORT CALL - Risk & Reward
| STOCK REPAIR | SHORT CALL | |
|---|---|---|
| Maximum Profit Scenario | Max Profit = Premium Received | |
| Maximum Loss Scenario | Loss Occurs When Price of Underlying > Strike Price of Short Call + Premium Received | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs SHORT CALL - Strategy Pros & Cons
| STOCK REPAIR | SHORT CALL | |
|---|---|---|
| Similar Strategies | Covered Put, Covered Calls | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Unlimited risk to the upside underlying stocks. • Potential loss more than the premium collected. |
| 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. | • With the help of this strategy, traders can book profit from falling prices in the underlying asset. • Less investment, more profit. • Traders can book profit when underlying stock price fall, move sideways or rise by a small amount. |