Compare Strategies
| BEAR PUT SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
|
|
|
| About Strategy |
Bear Put Spread Option StrategyWhen a trader is moderately bearish on the market he can implement this strategy. Bear-Put-Spread involves buying of ITM Put Option and selling of an OTM Put Option. If prices fall, the ITM Put option starts making profits and the OTM Put option also adds to profit at a certain extent if the expiry price stays above the OTM strike. However, if it falls below the OTM |
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. |
BEAR PUT SPREAD Vs DIAGONAL BEAR PUT SPREAD - Details
| BEAR PUT SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Strike Price of Long Put - Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
BEAR PUT SPREAD Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| BEAR PUT SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| When to use? | The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations. | 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 ITM Put Option, Sell OTM Put Option | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Strike Price of Long Put - Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
BEAR PUT SPREAD Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| BEAR PUT SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid. | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Max Loss = Net Premium Paid. | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Limited | Limited |
BEAR PUT SPREAD Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| BEAR PUT SPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Bear Call Spread, Bull Call Spread | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Limited profit. • Early assignment risk. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • If the strike price, expiration date or underlying stocks are rightly chosen then risk of losses would be limited to the net premium paid. • This strategy works well in declining markets. • Limited risk. | The Risk is limited. |