Compare Strategies
| SHORT PUT | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Short Put Option StrategyA trader will short put if he is bullish in nature and expects the underlying asset not to fall below a certain level. Risk: Losses will be potentially unlimited if the stock skyrockets above the strike price of put. |
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 Vs STOCK REPAIR - Details
| SHORT PUT | STOCK REPAIR | |
|---|---|---|
| Market View | Bullish | Bullish |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) |
| Number Of Positions | 1 | 3 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Limited | Unlimited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Strike Price - Premium |
SHORT PUT Vs STOCK REPAIR - When & How to use ?
| SHORT PUT | STOCK REPAIR | |
|---|---|---|
| Market View | Bullish | Bullish |
| When to use? | This strategy works well when you're Bullish that the price of the underlying will not fall beyond a certain level. | 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 Put Option | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Strike Price - Premium |
SHORT PUT Vs STOCK REPAIR - Risk & Reward
| SHORT PUT | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | Premium received in your account when you sell the Put Option. | |
| Maximum Loss Scenario | Unlimited (When the price of the underlying falls.) | |
| Risk | Unlimited | Limited |
| Reward | Limited | Unlimited |
SHORT PUT Vs STOCK REPAIR - Strategy Pros & Cons
| SHORT PUT | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Bull Put Spread, Short Starddle | |
| Disadvantage | • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | • Benefit from time decay. • Less capital required than buying the stock outright. • Profit when underlying stock price rise, move sideways or drop by a relatively small account. | • 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. |