Compare Strategies
RATIO CALL SPREAD | THE COLLAR | |
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About Strategy |
Ratio Call Spread Option StrategyAs the name suggests, a ratio of 2:1 is followed i.e. buy 1 ITM Call and simultaneously sell OTM Calls double the number of ITM Calls (In this case 2). This strategy is used by trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited since he is |
The Collar Option StrategyCollar Strategy is an extension to Covered Call Strategy. A trader, who is bullish in nature but has a very low risk appetite and wants to mitigate his risk will implement the Collar Strategy. Collar involves buying of stock in either Cash/Futures Market, buying an ATM Put Option & selling an OTM Call Option. The expiry dates of the op .. |
RATIO CALL SPREAD Vs THE COLLAR - Details
RATIO CALL SPREAD | THE COLLAR | |
---|---|---|
Market View | Neutral | Bullish |
Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) + Underlying |
Number Of Positions | 3 | 3 |
Strategy Level | Beginners | Advance |
Reward Profile | Limited | Limited |
Risk Profile | Unlimited | Limited |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + (Points of Maximum Profit / Number of Uncovered Calls), Lower Breakeven Point = Strike Price of Long Call +/- Net Premium Paid or Received | Price of Features - Call Premium + Put Premium |
RATIO CALL SPREAD Vs THE COLLAR - When & How to use ?
RATIO CALL SPREAD | THE COLLAR | |
---|---|---|
Market View | Neutral | Bullish |
When to use? | This strategy is used by trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited since he is selling two calls. | It should be used only in case where trader is certain about the bearish market view. |
Action | Buy 1 ITM Call, Sell 2 OTM Calls | Buy Underlying, Buy 1 ATM Put Option, Sell 1 OTM Call Option |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + (Points of Maximum Profit / Number of Uncovered Calls), Lower Breakeven Point = Strike Price of Long Call +/- Net Premium Paid or Received | Price of Features - Call Premium + Put Premium |
RATIO CALL SPREAD Vs THE COLLAR - Risk & Reward
RATIO CALL SPREAD | THE COLLAR | |
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Maximum Profit Scenario | Strike Price of Short Call - Strike Price of Long Call + Net Premium Received - Commissions Paid | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received |
Maximum Loss Scenario | Price of Underlying - Strike Price of Short Calls - Max Profit + Commissions Paid | Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received |
Risk | Unlimited | Limited |
Reward | Limited | Limited |
RATIO CALL SPREAD Vs THE COLLAR - Strategy Pros & Cons
RATIO CALL SPREAD | THE COLLAR | |
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Similar Strategies | Variable Ratio Write | Call Spread, Bull Put Spread |
Disadvantage | • Unlimited potential loss. • Complex strategy with limited profit. | • Limited profit. • A trader can book more profit without this strategy if the prices goes high. |
Advantages | • Downside risk is almost zero. • Investors can book profit from share prices moving within given limits. • Trader can maximise profit when the share closes at the upper breakeven point. | • This strategy protects the losses on underlying asset. • Risk gets limited if the price of the stocks goes down. • Trader can get ownership benefits life dividend and voting rights. |