Comparision (DIAGONAL BEAR PUT SPREAD
VS BULL CALL SPREAD)
Compare Strategies
DIAGONAL BEAR PUT SPREAD
BULL CALL SPREAD
About Strategy
Diagonal Bear Put Spread
When the trader is neutral – bearish in the near-month and bearish in the mid-month, he will apply Diagonal Bear Put Spread. This strategy involves buying Mid-Month ITM Put Options and selling (short/write) equal number of Near-Month OTM Put Options, of the same underlying asset. This strategy bags limited rewards with limited risk.
Bull Call Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to give decent returns in the near future. This strategy includes buying of an ‘In The Money’ Call Option and selling of ‘Deep Out Of the Money’ Call Option of the same underlying asset and the same expiration date. ..
DIAGONAL BEAR PUT SPREAD Vs BULL CALL SPREAD - Details
DIAGONAL BEAR PUT SPREAD
BULL CALL SPREAD
Market View
Bearish
Bullish
Type (CE/PE)
PE (Put Option)
CE (Call Option)
Number Of Positions
2
2
Strategy Level
Beginners
Beginners
Reward Profile
Limited
Limited
Risk Profile
Limited
Limited
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Strike price of purchased call + net premium paid
DIAGONAL BEAR PUT SPREAD Vs BULL CALL SPREAD - When & How to use ?
DIAGONAL BEAR PUT SPREAD
BULL CALL SPREAD
Market View
Bearish
Bullish
When to use?
When the trader is neutral – bearish in the near-month and bearish in the mid-month, he will apply Diagonal Bear Put Spread. This strategy involves buying Mid-Month ITM Put Options and selling (short/write) equal number of Near-Month OTM Put Options, of the same underlying asset
This strategy is used when an investor is Bullish in the market but expect the underlying to gain mildly in near future.
Action
Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option
Buy ITM Call Option, Sell OTM Call Option
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Strike price of purchased call + net premium paid
DIAGONAL BEAR PUT SPREAD Vs BULL CALL SPREAD - Risk & Reward
DIAGONAL BEAR PUT SPREAD
BULL CALL SPREAD
Maximum Profit Scenario
'Premiums received - Initial premium to execute + Strike price - Stock Price on final month
(Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid
Maximum Loss Scenario
When the stock trades up above the long-term put strike price.
Net Premium Paid
Risk
Limited
Limited
Reward
Limited
Limited
DIAGONAL BEAR PUT SPREAD Vs BULL CALL SPREAD - Strategy Pros & Cons
DIAGONAL BEAR PUT SPREAD
BULL CALL SPREAD
Similar Strategies
Bear Put Spread and Bear Call Spread
Collar
Disadvantage
Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads.
• Limited profit potential to the higher strike call sold if the underlying stock price rises. • Maximum profit only if stock rises to the higher of 2 strike prices selected.
Advantages
The Risk is limited.
• Allows you to reduce risk and cost of your investment. • When placing the spread, exit strategy is pre-determined in advance. • Risk is limited to the net premium paid.
