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.
Bull Put Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to move in an upward trend in the near future. This strategy includes buying of an ‘Out of the Money’ Put Option and selling of ‘In the Money’ Put Option of the same underlying asset and the same expiration date. When you write a Put, you will receive prem ..
STOCK REPAIR Vs BULL PUT SPREAD - When & How to use ?
STOCK REPAIR
BULL PUT SPREAD
Market View
Bullish
Bullish
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.
Bull Put Spread strategy is used when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall.
Action
Buy 1 ATM Call, Sell 2 OTM Calls
Buy OTM Put Option, Sell ITM Put Option
Breakeven Point
Strike price of short put - net premium paid
STOCK REPAIR Vs BULL PUT SPREAD - Risk & Reward
STOCK REPAIR
BULL PUT SPREAD
Maximum Profit Scenario
Max Profit = Net Premium Received
Maximum Loss Scenario
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Risk
Limited
Limited
Reward
Unlimited
Limited
STOCK REPAIR Vs BULL PUT SPREAD - Strategy Pros & Cons
STOCK REPAIR
BULL PUT SPREAD
Similar Strategies
Bull Call Spread, Bear Put Spread, Collar
Disadvantage
• Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged.
• Limited profit potential. • In loss situations, time decay may go against you.
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.
• Benefit from the time decay in profit positions but harmful in loss positions. • Profitable when underlying stock price rises, move sideways or marginal drop. • Reduce the downside risk.
