Compare Strategies
| STRIP | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Strip Option StrategyStrip Strategy is the opposite of Strap Strategy. When a trader is bearish on the market and bullish on volatility then he will implement this strategy by buying two ATM Put Options & one ATM Call Option, of the same strike price, expiry date & underlying asset. If the prices move downwards then this strategy will make more profits compared to short straddle because of the |
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. |
STRIP Vs DIAGONAL BEAR PUT SPREAD - Details
| STRIP | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) | PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Calls/Puts + Net Premium Paid, Lower Breakeven Point = Strike Price of Calls/Puts - (Net Premium Paid/2) | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
STRIP Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| STRIP | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | When a trader is bearish on the market and bullish on volatility then he will implement this strategy. | 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 | Buy 1 ATM Call, Buy 2 ATM Puts | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Upper Breakeven Point = Strike Price of Calls/Puts + Net Premium Paid, Lower Breakeven Point = Strike Price of Calls/Puts - (Net Premium Paid/2) | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
STRIP Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| STRIP | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Price of Underlying - Strike Price of Calls - Net Premium Paid OR 2 x (Strike Price of Puts - Price of Underlying) - Net Premium Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Net Premium Paid + Commissions Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
STRIP Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| STRIP | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Strap, Short Put Ladder | Bear Put Spread and Bear Call Spread |
| Disadvantage | Expensive., The share price must change significantly to generate profit., High Bid/Offer spread can have a negative influence on the position. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | Profit is generated when the share price changes in any direction., Limited loss., The profit is potentially unlimited when share prices are moving. | The Risk is limited. |