Compare Strategies
LONG GUTS | LONG STRADDLE | |
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About Strategy |
Long Guts Option StrategyThis strategy is implemented by a trader when he is neutral on the movements and bullish on volatility i.e. he expects the stock to move in either direction with high magnitude. This strategy involves buying 1 ITM Call Option and 1 ITM Put Option. This strategy can be called as Debit Spread because trader’s account is debited at the time of entering the positions.< |
Long Straddle Option StrategyStraddle is neither bullish nor bearish strategy; it is a market neutral strategy. Here a trader wishes to take advantage of the volatility in the market. This strategy involves buying of one Call option and one Put option of the same strike price, same expiry date and of the same underlying asset. Now a trader is bound to make profits once stock moves in either direc .. |
LONG GUTS Vs LONG STRADDLE - Details
LONG GUTS | LONG STRADDLE | |
---|---|---|
Market View | Neutral | Neutral |
Type (CE/PE) | CE (Call Option) + PE (Put Option) | CE (Call Option) + PE (Put Option) |
Number Of Positions | 2 | 2 |
Strategy Level | Beginners | Beginners |
Reward Profile | Unlimited | Unlimited |
Risk Profile | Limited | Limited |
Breakeven Point | Upper Breakeven Point = Net Premium Paid + Strike Price of Long Call, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium |
LONG GUTS Vs LONG STRADDLE - When & How to use ?
LONG GUTS | LONG STRADDLE | |
---|---|---|
Market View | Neutral | Neutral |
When to use? | This strategy is implemented by a trader when he is neutral on the movements and bullish on volatility i.e. he expects the stock to move in either direction with high magnitude. | This options strategy is work well when and investor market view is bearish. The strategy minimizes your risk in the event of prime movements going against your expectations. |
Action | Buy 1 ITM Call, Buy 1 ITM Put | Buy Call Option, Buy Put Option |
Breakeven Point | Upper Breakeven Point = Net Premium Paid + Strike Price of Long Call, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid | Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium |
LONG GUTS Vs LONG STRADDLE - Risk & Reward
LONG GUTS | LONG STRADDLE | |
---|---|---|
Maximum Profit Scenario | Price of Underlying - Strike Price of Long Call - Net Premium Paid OR Strike Price of Long Put - Price of Underlying - Premium Paid | Max profit is achieved when at one option is exercised. |
Maximum Loss Scenario | Net Premium Paid + Strike Price of Long Put - Strike Price of Long Call + Commissions Paid | Maximum Loss = Net Premium Paid |
Risk | Limited | Limited |
Reward | Unlimited | Unlimited |
LONG GUTS Vs LONG STRADDLE - Strategy Pros & Cons
LONG GUTS | LONG STRADDLE | |
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Similar Strategies | Short Put Ladder, Strip, Strap | Bear Put Spread |
Disadvantage | • More commission involved than simply buying call or put option. • Expensive. | • There should be continuous movement of the stock and options price for this strategy to be profitable. • Time decay hurts long option if the strike price, expiration date or underlying stock are badly chosen. |
Advantages | • Investors can get unlimited profit if the underlying asset goes up or down. • Ability to profit no matter if the market goes in either direction. • Limited loss. | • Unlimited potential beyond the breakeven point in either direction . • Book your profit from highly volatile stocks without determining the direction. • Limited risk, more profit. |