Compare Strategies
| DIAGONAL BEAR PUT SPREAD | SHORT PUT | |
|---|---|---|
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| About Strategy |
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. |
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. |
DIAGONAL BEAR PUT SPREAD Vs SHORT PUT - Details
| DIAGONAL BEAR PUT SPREAD | SHORT PUT | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 1 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Strike Price - Premium |
DIAGONAL BEAR PUT SPREAD Vs SHORT PUT - When & How to use ?
| DIAGONAL BEAR PUT SPREAD | SHORT PUT | |
|---|---|---|
| Market View | Bearish | Bullish |
| When to use? | 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 | This strategy works well when you're Bullish that the price of the underlying will not fall beyond a certain level. |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | Sell Put Option |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. | Strike Price - Premium |
DIAGONAL BEAR PUT SPREAD Vs SHORT PUT - Risk & Reward
| DIAGONAL BEAR PUT SPREAD | SHORT PUT | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | Premium received in your account when you sell the Put Option. |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | Unlimited (When the price of the underlying falls.) |
| Risk | Limited | Unlimited |
| Reward | Limited | Limited |
DIAGONAL BEAR PUT SPREAD Vs SHORT PUT - Strategy Pros & Cons
| DIAGONAL BEAR PUT SPREAD | SHORT PUT | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | Bull Put Spread, Short Starddle |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply. |
| Advantages | The Risk is limited. | • 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. |