Compare Strategies
| PUT BACKSPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Put Backspread Option StrategyIf the trader is bearish on market and bullish in volatility, he will implement this strategy. However the trader can be neutral in nature i.e. indifferent if the market moves in either of the direction, this strategy will make profits, but uptrend will give a capped income than downtrend which will give unlimited returns. |
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. |
PUT BACKSPREAD Vs DIAGONAL BEAR PUT SPREAD - Details
| PUT BACKSPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | |
| Risk Profile | Limited | |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
PUT BACKSPREAD Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| PUT BACKSPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| 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 | |
| Action | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option | |
| Breakeven Point | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
PUT BACKSPREAD Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| PUT BACKSPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month | |
| Maximum Loss Scenario | When the stock trades up above the long-term put strike price. | |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
PUT BACKSPREAD Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| PUT BACKSPREAD | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Bear Put Spread and Bear Call Spread | |
| Disadvantage | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. | |
| Advantages | The Risk is limited. |