Compare Strategies
| STOCK REPAIR | SHORT PUT BUTTERFLY | |
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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 Put Butterfly Option StrategyIn Short Put Butterfly strategy, a trader is neutral in nature and expects the market to remain range bound in the near future. A trader will buy 2 ATM Put Options; sell 1 ITM & 1 OTM Put Options. Here risk and returns both are limited. Risk:< .. |
STOCK REPAIR Vs SHORT PUT BUTTERFLY - Details
| STOCK REPAIR | SHORT PUT BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 3 | 4 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Highest Strike Short Put - Net Premium Received, Lower Breakeven Point = Strike Price of Lowest Strike Short Put + Net Premium Received |
STOCK REPAIR Vs SHORT PUT BUTTERFLY - When & How to use ?
| STOCK REPAIR | SHORT PUT BUTTERFLY | |
|---|---|---|
| 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. | In Short Put Butterfly strategy, a trader is neutral in nature and expects the market to remain range bound in the near future. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell 1 ITM Put, Buy 2 ATM Put, Sell 1 OTM Put |
| Breakeven Point | Upper Breakeven Point = Strike Price of Highest Strike Short Put - Net Premium Received, Lower Breakeven Point = Strike Price of Lowest Strike Short Put + Net Premium Received |
STOCK REPAIR Vs SHORT PUT BUTTERFLY - Risk & Reward
| STOCK REPAIR | SHORT PUT BUTTERFLY | |
|---|---|---|
| Maximum Profit Scenario | Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Strike Price of Higher Strike Short Put - Strike Price of Long Put - Net Premium Received + Commissions Paid | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs SHORT PUT BUTTERFLY - Strategy Pros & Cons
| STOCK REPAIR | SHORT PUT BUTTERFLY | |
|---|---|---|
| Similar Strategies | Short Condor, Reverse Iron Condor | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • High risk strategy and may cause huge losses if the price of the underlying stocks falls steeply. • Higher profit is only possible when shares get close to expiration. |
| 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. | • Benefits from time decay. • Traders can earn more in a rising or range bound scenario. • Benefits from a surge in volatility. |