Compare Strategies
| SHORT PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
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| About Strategy |
Short Put Ladder Option StrategyThis strategy is implemented when a trader is slightly bearish on the market. A trader is required to be bullish over the volatility in the market. It involves sale of an ITM Put Option and buying of 1 ATM & 1 OTM Put Options. However, the risk associated with this strategy is limited.
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Diagonal Bear Put SpreadWhen 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. |
SHORT PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - Details
| SHORT PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Put - Net Premium Received Lower Breakeven Point = Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
SHORT PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| SHORT PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | This strategy is implemented when a trader is slightly bearish on the market. | 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 |
| Action | Sell ITM Put Option, Buying 1 ATM & 1 OTM Put Option. | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Put - Net Premium Received Lower Breakeven Point = Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
SHORT PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| SHORT PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | When Price of Underlying < Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Strike Price of Short Put - Strike Price of Higher Strike Long Put - Net Premium Received + Commissions Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
SHORT PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| SHORT PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Strap, Strip | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Best to use when you are confident about movement of market. • Small margin required. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • When there is surge in implied volatility, this strategy can give more profit. • Unlimited downside profit. • Limited risk and unlimited reward strategy. | The Risk is limited. |