Compare Strategies
| PROTECTIVE COLLAR | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Protective Collar Strategy This Strategy is implemented when the investor requires downside protection for the short - to medium term but at lower cost. Buying protective puts can be an expensive proposition and writing OTM calls can defray the cost of the puts quite substantially. Protective Collar is considered as bearish to neutral strategy. In this strategy risk and reward is both are limited. This |
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 COLLAR Vs STOCK REPAIR - Details
| PROTECTIVE COLLAR | STOCK REPAIR | |
|---|---|---|
| Market View | Neutral | Bullish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) | CE (Call Option) |
| Number Of Positions | 2 | 3 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Limited | Unlimited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Purchase Price of Underlying + Net Premium Paid |
PROTECTIVE COLLAR Vs STOCK REPAIR - When & How to use ?
| PROTECTIVE COLLAR | STOCK REPAIR | |
|---|---|---|
| Market View | Neutral | Bullish |
| When to use? | This Strategy is implemented when the investor requires downside protection for the short - to medium term but at lower cost. | 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 | • Short 1 Call Option, • Long 1 Put Option | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Purchase Price of Underlying + Net Premium Paid |
PROTECTIVE COLLAR Vs STOCK REPAIR - Risk & Reward
| PROTECTIVE COLLAR | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | • Call strike - stock purchase price - net premium paid + net credit received | |
| Maximum Loss Scenario | • Stock purchase price - put strike - net premium paid - put strike + net credit received | |
| Risk | Limited | Limited |
| Reward | Limited | Unlimited |
PROTECTIVE COLLAR Vs STOCK REPAIR - Strategy Pros & Cons
| PROTECTIVE COLLAR | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Bull Put Spread, Bull Call Spread | |
| Disadvantage | • Potential profit is lower or limited. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | The Risk is limited. | • 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. |