Compare Strategies
| STOCK REPAIR | REVERSE IRON BUTTERFLY | |
|---|---|---|
|
|
|
| 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 |
Reverse Iron Butterfly Option StrategyReverse Iron Butterfly as the name suggests is the opposite of Iron Butterfly. In Reverse Iron Butterfly, a trader is bullish on volatility and expects the market to make significant move in the near future in either directions. Here a trader will buy 1 ATM Call Option, sell 1 OTM Call Option, buy 1 ATM Put Option, sell 1 OTM Put Option. This strategy also bags lim .. |
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - Details
| STOCK REPAIR | REVERSE IRON BUTTERFLY | |
|---|---|---|
| Market View | Bullish | Neutral |
| Type (CE/PE) | CE (Call Option) | 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 Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid |
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - When & How to use ?
| STOCK REPAIR | REVERSE IRON 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. | This strategy is used when a trader is bullish on volatility and expects the market to make significant move in the near future in either directions. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell 1 OTM Put, Buy 1 ATM Put, Buy 1 ATM Call, Sell 1 OTM Call |
| Breakeven Point | Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid |
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - Risk & Reward
| STOCK REPAIR | REVERSE IRON BUTTERFLY | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Short Call (or Long Put) - Strike Price of Long Call (or Short Put) - Net Premium Paid - Commissions Paid | |
| Maximum Loss Scenario | Net Premium Paid + Commissions Paid | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - Strategy Pros & Cons
| STOCK REPAIR | REVERSE IRON BUTTERFLY | |
|---|---|---|
| Similar Strategies | Short Put Butterfly, Short Condor | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Potential loss is higher than gain, complex strategy. • Not suitable for beginners. |
| 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. | • Able to profit whether stocks move in either direction up or down. • This strategy can be used by option traders who cannot use credit spreads. • Predictable maximum loss and profits, volatile strategy. |