Compare Strategies
| STOCK REPAIR | SHORT PUT | |
|---|---|---|
|
|
|
| About Strategy |
Stock Repair Option StrategyStock 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. Suppose Mr. X has |
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. |
STOCK REPAIR Vs SHORT PUT - Details
| STOCK REPAIR | SHORT PUT | |
|---|---|---|
| Market View | Bullish | Bullish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 3 | 1 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Unlimited |
| Breakeven Point | Strike Price - Premium |
STOCK REPAIR Vs SHORT PUT - When & How to use ?
| STOCK REPAIR | SHORT PUT | |
|---|---|---|
| Market View | Bullish | Bullish |
| 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 works well when you're Bullish that the price of the underlying will not fall beyond a certain level. |
| Action | Buy 1 ATM Call, Sell 2 OTM Calls | Sell Put Option |
| Breakeven Point | Strike Price - Premium |
STOCK REPAIR Vs SHORT PUT - Risk & Reward
| STOCK REPAIR | SHORT PUT | |
|---|---|---|
| Maximum Profit Scenario | Premium received in your account when you sell the Put Option. | |
| Maximum Loss Scenario | Unlimited (When the price of the underlying falls.) | |
| Risk | Limited | Unlimited |
| Reward | Unlimited | Limited |
STOCK REPAIR Vs SHORT PUT - Strategy Pros & Cons
| STOCK REPAIR | SHORT PUT | |
|---|---|---|
| Similar Strategies | Bull Put Spread, Short Starddle | |
| Disadvantage | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. | • Unlimited risk. • Huge losses if the price of the underlying stock falls steeply. |
| 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. | • 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. |