Comparision (STOCK REPAIR
VS REVERSE IRON BUTTERFLY)
Compare Strategies
STOCK REPAIR
REVERSE IRON BUTTERFLY
About Strategy
Stock Repair Option Strategy
Stock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery.
Reverse Iron Butterfly as the name suggests is the opposite of Iron Butterfly. In Reverse Iron Butterfly, a trader is bullish on volatility and expects the market to make significant move in the near future in either directions. Here a trader will buy 1 ATM Call Option, sell 1 OTM Call Option, buy 1 ATM Put Option, sell 1 OTM Put Option. This strategy also bags lim ..
Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - When & How to use ?
STOCK REPAIR
REVERSE IRON BUTTERFLY
Market View
Bullish
Neutral
When to use?
Stock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery.
This strategy is used when a trader is bullish on volatility and expects the market to make significant move in the near future in either directions.
Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - Risk & Reward
STOCK REPAIR
REVERSE IRON BUTTERFLY
Maximum Profit Scenario
Strike Price of Short Call (or Long Put) - Strike Price of Long Call (or Short Put) - Net Premium Paid - Commissions Paid
Maximum Loss Scenario
Net Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Unlimited
Limited
STOCK REPAIR Vs REVERSE IRON BUTTERFLY - Strategy Pros & Cons
STOCK REPAIR
REVERSE IRON BUTTERFLY
Similar Strategies
Short Put Butterfly, Short Condor
Disadvantage
• Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged.
• Potential loss is higher than gain, complex strategy. • Not suitable for beginners.
Advantages
• This strategy creates an opportunity to recover losses by lowering our breakeven. • No margin required. • No additional downside risk and costs nothing to put on.
• Able to profit whether stocks move in either direction up or down. • This strategy can be used by option traders who cannot use credit spreads. • Predictable maximum loss and profits, volatile strategy.
