Compare Strategies
| SYNTHETIC LONG CALL | DIAGONAL BEAR PUT SPREAD | |
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| About Strategy |
Synthetic Long Call Option StrategyA trader is bullish in nature for short term, but also fearful about the downside risk associated with it. Here, a trader wants to hold an underlying asset either in physical form like in case of commodities or demat (electronic) form in case of stocks. But he is always exposed to downside risk and in order to mitigate his losses, |
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. |
SYNTHETIC LONG CALL Vs DIAGONAL BEAR PUT SPREAD - Details
| SYNTHETIC LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | When Price of Underlying > Purchase Price of Underlying + Premium Paid | Limited |
| Risk Profile | Limited (Maximum loss happens when the price of instrument move above from the strike price of put) | Limited |
| Breakeven Point | Underlying Price + Put Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
SYNTHETIC LONG CALL Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| SYNTHETIC LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| When to use? | A trader is bullish in nature for short term, but also fearful about the downside risk associated with it. | 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 | Buy 1 ATM Put or OTM Put | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Underlying Price + Put Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
SYNTHETIC LONG CALL Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| SYNTHETIC LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Current Price - Purchase Price - Premium Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Premium Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
SYNTHETIC LONG CALL Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| SYNTHETIC LONG CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Protective Put, Long Call | Bear Put Spread and Bear Call Spread |
| Disadvantage | •Chances of loss if the underlying goes down. •Incur losses if option is exercised. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | •Limited risk, unlimited profit. •Protection to your long-term holdings. • Limited loss to the to the premium paid for Put option. | The Risk is limited. |