Comparision (DIAGONAL BEAR PUT SPREAD
VS LONG STRADDLE)
Compare Strategies
DIAGONAL BEAR PUT SPREAD
LONG STRADDLE
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.
Straddle 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 ..
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - Details
DIAGONAL BEAR PUT SPREAD
LONG STRADDLE
Market View
Bearish
Neutral
Type (CE/PE)
PE (Put Option)
CE (Call Option) + PE (Put Option)
Number Of Positions
2
2
Strategy Level
Beginners
Beginners
Reward Profile
Limited
Unlimited
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.
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - When & How to use ?
DIAGONAL BEAR PUT SPREAD
LONG STRADDLE
Market View
Bearish
Neutral
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 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
Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option
Buy Call Option, Buy Put Option
Breakeven Point
This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven.
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call + Net Premium
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - Risk & Reward
DIAGONAL BEAR PUT SPREAD
LONG STRADDLE
Maximum Profit Scenario
'Premiums received - Initial premium to execute + Strike price - Stock Price on final month
Max profit is achieved when at one option is exercised.
Maximum Loss Scenario
When the stock trades up above the long-term put strike price.
Maximum Loss = Net Premium Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
DIAGONAL BEAR PUT SPREAD Vs LONG STRADDLE - Strategy Pros & Cons
DIAGONAL BEAR PUT SPREAD
LONG STRADDLE
Similar Strategies
Bear Put Spread and Bear Call Spread
Bear Put Spread
Disadvantage
Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads.
• 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
The Risk is limited.
• Unlimited potential beyond the breakeven point in either direction . • Book your profit from highly volatile stocks without determining the direction. • Limited risk, more profit.
