Compare Strategies
| COVERED PUT | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Covered Put Option StrategyThis strategy is exactly opposite to Covered Call Strategy. Here the investor is neutral or moderately bearish in nature and wants to take advantage of the price fall in the near future. The trader will short one lot of stock future. Now the trader will short ATM Put Option, the option strike price will be his exit price. If the prices rally above the strike price, the |
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 .. |
COVERED PUT Vs STOCK REPAIR - Details
| COVERED PUT | STOCK REPAIR | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | PE (Put Option) + Underlying | CE (Call Option) |
| Number Of Positions | 2 | 3 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | Unlimited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Futures Price + Premium Received |
COVERED PUT Vs STOCK REPAIR - When & How to use ?
| COVERED PUT | STOCK REPAIR | |
|---|---|---|
| Market View | Bearish | Bullish |
| When to use? | The Covered Put works well when the market is moderately Bearish. | 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. |
| Action | Sell Underlying Sell OTM Put Option | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Futures Price + Premium Received |
COVERED PUT Vs STOCK REPAIR - Risk & Reward
| COVERED PUT | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | The profit happens when the price of the underlying moves above strike price of Short Put. | |
| Maximum Loss Scenario | Price of Underlying - Sale Price of Underlying - Premium Received | |
| Risk | Unlimited | Limited |
| Reward | Limited | Unlimited |
COVERED PUT Vs STOCK REPAIR - Strategy Pros & Cons
| COVERED PUT | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Bear Put Spread, Bear Call Spread | |
| Disadvantage | • Limited profit, unlimited risk. • Trader should have enough experience before using this strategy. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | • Investors can book profit when underlying stock price drop, move sideways or rises by a small amount. • Able to generate monthly income. • Able to generate profit from fall in prices or mild increase in the prices. | • 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. |