Compare Strategies
| PROTECTIVE CALL | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Protective Call Option StrategyThis strategy is simply the reversal of the Synthetic Call Strategy. This strategy is implemented when a trader is bearish on the market and expects to go down. Trader will short underlying stock in the cash market and buy either an ATM Call Option or OTM Call Option. The Call Option is bought to protect / hedge the upside risk on the short position. The |
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 .. |
PROTECTIVE CALL Vs STOCK REPAIR - Details
| PROTECTIVE CALL | STOCK REPAIR | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) |
| Number Of Positions | 1 | 3 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Unlimited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Sale Price of Underlying + Premium Paid |
PROTECTIVE CALL Vs STOCK REPAIR - When & How to use ?
| PROTECTIVE CALL | STOCK REPAIR | |
|---|---|---|
| Market View | Bearish | Bullish |
| When to use? | This strategy is implemented when a trader is bearish on the market and expects to go down. | 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. |
| Action | Buy 1 ATM Call | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Sale Price of Underlying + Premium Paid |
PROTECTIVE CALL Vs STOCK REPAIR - Risk & Reward
| PROTECTIVE CALL | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | Sale Price of Underlying - Price of Underlying - Premium Paid | |
| Maximum Loss Scenario | Premium Paid + Call Strike Price - Sale Price of Underlying + Commissions Paid | |
| Risk | Limited | Limited |
| Reward | Unlimited | Unlimited |
PROTECTIVE CALL Vs STOCK REPAIR - Strategy Pros & Cons
| PROTECTIVE CALL | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Put Backspread, Long Put | |
| Disadvantage | • Profitable when market moves as expected. • Not good for beginners. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | • Limited risk if the market moves in opposite direction as expected. • Allows you to keep open a profitable position to make further profits. • Unlimited profit potential. | • 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. |