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Comparision (RATIO PUT WRITE VS LONG PUT LADDER)

 

Compare Strategies

  RATIO PUT WRITE LONG PUT LADDER
About Strategy

Ratio Put Write Option Strategy 

This strategy is implemented by selling (short) the underlying asset in the cash/futures market. Simultaneously, sell ATM Puts double the number of long quantity. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited.

Long Put Ladder Option Strategy 

Long Put Ladder can be implemented when a trader is slightly bearish on the market and volatility. It involves buying of an ITM Put Option and sale of 1 ATM & 1 OTM Put Options. However, the risk associated with this strategy is unlimited and reward is limited.
Risk:< ..

RATIO PUT WRITE Vs LONG PUT LADDER - Details

RATIO PUT WRITE LONG PUT LADDER
Market View Neutral Neutral
Type (CE/PE) PE (Put Option) PE (Put Option)
Number Of Positions 2 3
Strategy Level Beginners Advance
Reward Profile Max Profit Achieved When Price of Underlying = Strike Price of Short Puts Limited
Risk Profile Loss Occurs When Price of Underlying < Strike Price of Short Put - Net Premium Received OR Price of Underlying > Strike Price of Short Put + Net Premium Received Unlimited
Breakeven Point Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit Upper Breakeven Point = Strike Price of Long Put - Net Premium Paid, Lower Breakeven Point = Total Strike Prices of Short Puts - Strike Price of Long Put + Net Premium Paid

RATIO PUT WRITE Vs LONG PUT LADDER - When & How to use ?

RATIO PUT WRITE LONG PUT LADDER
Market View Neutral Neutral
When to use? This strategy is implemented by selling (short) the underlying asset in the cash/futures market. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future This Strategy can be implemented when a trader is slightly bearish on the market and volatility.
Action Sell 2 ATM Puts Buy 1 ITM Put, Sell 1 ATM Put, Sell 1 OTM Put
Breakeven Point Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit Upper Breakeven Point = Strike Price of Long Put - Net Premium Paid, Lower Breakeven Point = Total Strike Prices of Short Puts - Strike Price of Long Put + Net Premium Paid

RATIO PUT WRITE Vs LONG PUT LADDER - Risk & Reward

RATIO PUT WRITE LONG PUT LADDER
Maximum Profit Scenario Net Premium Received - Commissions Paid Strike Price of Long Put - Strike Price of Higher Strike Short Put - Net Premium Paid - Commissions Paid
Maximum Loss Scenario Price of Underlying - Sale Price of Underlying - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid When Price of Underlying < Total Strike Prices of Short Puts - Strike Price of Long Put + Net Premium Paid
Risk Unlimited Unlimited
Reward Limited Limited

RATIO PUT WRITE Vs LONG PUT LADDER - Strategy Pros & Cons

RATIO PUT WRITE LONG PUT LADDER
Similar Strategies Short Strangle and Short Straddle Short Strangle (Sell Strangle), Short Straddle (Sell Straddle)
Disadvantage • Potential loss is higher than gain. • Limited profit. • Unlimited risk. • Margin required.
Advantages • Reduces capital outlay of bear put spread. • Wider maximum profit zone. • When there is decrease in implied volatility, this strategy can give profit.

RATIO PUT WRITE

LONG PUT LADDER