Compare Strategies
| LONG CALL BUTTERFLY | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Long Call Butterfly Option StrategyA trader, who is neutral in nature and believes that there will be very low volatility i.e. expects the market to remain range bound, will implement this strategy. This strategy involves selling of 2 ATM Call Options, buying 1 ITM Call Option & buying 1 OTM Call Option of the same expiry date & same underlying asset. The difference between the strikes sho |
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. |
LONG CALL BUTTERFLY Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG CALL BUTTERFLY | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 4 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven = Higher Strike Price - Net Premium, Lower Breakeven = Lower Strike Price + Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG CALL BUTTERFLY Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG CALL BUTTERFLY | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | This strategy should be used when you're expecting no volatility in the price of the underlying. | 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 2 ATM Call, Buy 1 ITM Call, Buy 1 OTM Call | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Upper Breakeven = Higher Strike Price - Net Premium, Lower Breakeven = Lower Strike Price + Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG CALL BUTTERFLY Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG CALL BUTTERFLY | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Adjacent strikes - Net premium debit. | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Net Premium Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Limited | Limited |
LONG CALL BUTTERFLY Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG CALL BUTTERFLY | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | - | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Due to limited lifespan of call options, you can lose the premium paid. • Limited profit which is bound in a narrow range between the two wing strikes. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Under this strategy, a trader can book profit even when there is not volatility in the market. • Limited risks to the net premium paid. • This strategy allows you to gain more profits by investing less and limiting your losses to minimum. | The Risk is limited. |