Compare Strategies
| STOCK REPAIR | LONG PUT | |
|---|---|---|
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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 |
Long Put Option StrategyThis strategy is implemented by buying 1 Put Option i.e. a single position, when the person is bearish on the market and expects the market to move downwards in the near future. |
STOCK REPAIR Vs LONG PUT - Details
| STOCK REPAIR | LONG PUT | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 3 | 1 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Unlimited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Strike Price of Long Put - Premium Paid |
STOCK REPAIR Vs LONG PUT - When & How to use ?
| STOCK REPAIR | LONG PUT | |
|---|---|---|
| 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. | A long put option strategy works well when you're expecting the underlying asset to sharply decline or be volatile in near future. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Buy Put Option |
| Breakeven Point | Strike Price of Long Put - Premium Paid |
STOCK REPAIR Vs LONG PUT - Risk & Reward
| STOCK REPAIR | LONG PUT | |
|---|---|---|
| Maximum Profit Scenario | Profit = Strike Price of Long Put - Premium Paid | |
| Maximum Loss Scenario | Max Loss = Premium Paid + Commissions Paid | |
| Risk | Limited | Limited |
| Reward | Unlimited | Unlimited |
STOCK REPAIR Vs LONG PUT - Strategy Pros & Cons
| STOCK REPAIR | LONG PUT | |
|---|---|---|
| Similar Strategies | Protective Call, Short Put | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • 100% loss if strike price, expiration dates or underlying stocks are badly chosen. • Time decay. |
| 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. | • Limited risk to the premium paid. • Less capital investment and more profit. • Unlimited profit potential with limited risk. |