Compare Strategies
CALL BACKSPREAD | THE COLLAR | |
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About Strategy |
Call Backspread Option Trading This strategy is adopted by traders who are bullish in nature. He expects market and volatility to rise in the near future. A trader need not be direction specific here (i.e. an upward or downward trend, but a small bias towards an uptrend should always be present, as the gains will be much higher once the market moves up r |
The Collar Option StrategyCollar Strategy is an extension to Covered Call Strategy. A trader, who is bullish in nature but has a very low risk appetite and wants to mitigate his risk will implement the Collar Strategy. Collar involves buying of stock in either Cash/Futures Market, buying an ATM Put Option & selling an OTM Call Option. The expiry dates of the op .. |
CALL BACKSPREAD Vs THE COLLAR - Details
CALL BACKSPREAD | THE COLLAR | |
---|---|---|
Market View | Bullish | Bullish |
Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) + Underlying |
Number Of Positions | 3 | 3 |
Strategy Level | Advance | Advance |
Reward Profile | Unlimited | Limited |
Risk Profile | Limited | Limited |
Breakeven Point | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss | Price of Features - Call Premium + Put Premium |
CALL BACKSPREAD Vs THE COLLAR - When & How to use ?
CALL BACKSPREAD | THE COLLAR | |
---|---|---|
Market View | Bullish | Bullish |
When to use? | This strategy is used when the investor expects the price of the stock to rise in the future. | It should be used only in case where trader is certain about the bearish market view. |
Action | Sell 1 ITM Call, BUY 2 OTM Call | Buy Underlying, Buy 1 ATM Put Option, Sell 1 OTM Call Option |
Breakeven Point | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss | Price of Features - Call Premium + Put Premium |
CALL BACKSPREAD Vs THE COLLAR - Risk & Reward
CALL BACKSPREAD | THE COLLAR | |
---|---|---|
Maximum Profit Scenario | Unlimited profit potential if the stock goes in upward direction. | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received |
Maximum Loss Scenario | Strike Price of long call - Strike Price of short call - Net premium received | Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received |
Risk | Limited | Limited |
Reward | Unlimited | Limited |
CALL BACKSPREAD Vs THE COLLAR - Strategy Pros & Cons
CALL BACKSPREAD | THE COLLAR | |
---|---|---|
Similar Strategies | - | Call Spread, Bull Put Spread |
Disadvantage | • Limited profit. • A trader can book more profit without this strategy if the prices goes high. | |
Advantages | • Unlimited profit potential. | • This strategy protects the losses on underlying asset. • Risk gets limited if the price of the stocks goes down. • Trader can get ownership benefits life dividend and voting rights. |