Compare Strategies
| STOCK REPAIR | LONG PUT BUTTERFLY | |
|---|---|---|
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| About Strategy |
Stock Repair Option StrategyStock 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. Suppose Mr. X has |
Long Put Butterfly Option StrategyThe Long Put Butterfly is a neutral strategy where a trader will be bearish on the volatility i.e. he thinks the market will have sideways kind of movement and will not rally sharply in either direction in the near future. This strategy involves sale of 2 ATM Put Options, buy 1 ITM and 1 OTM Put Option. The risk and reward are limited. |
STOCK REPAIR Vs LONG PUT BUTTERFLY - Details
| STOCK REPAIR | LONG PUT BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 3 | 4 |
| Strategy Level | Beginners | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Highest Strike Long Put - Net Premium Paid, Lower Breakeven Point = Strike Price of Lowest Strike Long Put + Net Premium Paid |
STOCK REPAIR Vs LONG PUT BUTTERFLY - When & How to use ?
| STOCK REPAIR | LONG PUT BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| 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. | The Long Put Butterfly is a neutral strategy where a trader will be bearish on the volatility i.e. he thinks the market will have sideways kind of movement and will not rally sharply in either direction in the near future. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Buy 1 OTM Put, Sell 2 ATM Puts, Buy 1 ITM Put |
| Breakeven Point | Upper Breakeven Point = Strike Price of Highest Strike Long Put - Net Premium Paid, Lower Breakeven Point = Strike Price of Lowest Strike Long Put + Net Premium Paid |
STOCK REPAIR Vs LONG PUT BUTTERFLY - Risk & Reward
| STOCK REPAIR | LONG PUT BUTTERFLY | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Higher Strike Long Put - Strike Price of Short Put - Net Premium Paid - Commissions Paid | |
| Maximum Loss Scenario | When Price of Underlying <= Strike Price of Lower Strike Long Put OR Price of Underlying >= Strike Price of Higher Strike Long Put | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs LONG PUT BUTTERFLY - Strategy Pros & Cons
| STOCK REPAIR | LONG PUT BUTTERFLY | |
|---|---|---|
| Similar Strategies | Iron Condors, Iron Butterfly | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Risk is higher than reward. • When the underlying price is in between the two breakeven points, time decay hurts the position. |
| 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. | • Limited maximum loss. • Unlimited profit potential, risk only limited to loss of premium. • Benefits from low volatility. |