Compare Strategies
BEAR PUT SPREAD | SHORT PUT | |
---|---|---|
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 |
Short Put Option StrategyA trader will short put if he is bullish in nature and expects the underlying asset not to fall below a certain level. Risk: Losses will be potentially unlimited if the stock skyrockets above the strike price of put. |
BEAR PUT SPREAD Vs SHORT PUT - Details
BEAR PUT SPREAD | SHORT PUT | |
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Market View | Bearish | Bullish |
Type (CE/PE) | PE (Put Option) | PE (Put Option) |
Number Of Positions | 2 | 1 |
Strategy Level | Advance | Beginners |
Reward Profile | Limited | Limited |
Risk Profile | Limited | Unlimited |
Breakeven Point | Strike Price of Long Put - Net Premium | Strike Price - Premium |
BEAR PUT SPREAD Vs SHORT PUT - When & How to use ?
BEAR PUT SPREAD | SHORT PUT | |
---|---|---|
Market View | Bearish | Bullish |
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. | This strategy works well when you're Bullish that the price of the underlying will not fall beyond a certain level. |
Action | Buy ITM Put Option, Sell OTM Put Option | Sell Put Option |
Breakeven Point | Strike Price of Long Put - Net Premium | Strike Price - Premium |
BEAR PUT SPREAD Vs SHORT PUT - Risk & Reward
BEAR PUT SPREAD | SHORT PUT | |
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Maximum Profit Scenario | Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid. | Premium received in your account when you sell the Put Option. |
Maximum Loss Scenario | Max Loss = Net Premium Paid. | Unlimited (When the price of the underlying falls.) |
Risk | Limited | Unlimited |
Reward | Limited | Limited |
BEAR PUT SPREAD Vs SHORT PUT - Strategy Pros & Cons
BEAR PUT SPREAD | SHORT PUT | |
---|---|---|
Similar Strategies | Bear Call Spread, Bull Call Spread | Bull Put Spread, Short Starddle |
Disadvantage | • Limited profit. • Early assignment risk. | • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply. |
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. | • Benefit from time decay. • Less capital required than buying the stock outright. • Profit when underlying stock price rise, move sideways or drop by a relatively small account. |