Compare Strategies
| THE COLLAR | DIAGONAL BEAR PUT SPREAD | |
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| About Strategy |
The Collar Option StrategyCollar Strategy is an extension to Covered Call Strategy. A trader, who is bullish in nature but has a very low risk appetite and wants to mitigate his risk will implement the Collar Strategy. Collar involves buying of stock in either Cash/Futures Market, buying an ATM Put Option & selling an OTM Call Option. The expiry dates of the op |
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. |
THE COLLAR Vs DIAGONAL BEAR PUT SPREAD - Details
| THE COLLAR | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) + Underlying | PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Price of Features - Call Premium + Put Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
THE COLLAR Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| THE COLLAR | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bullish | Bearish |
| When to use? | It should be used only in case where trader is certain about the bearish market view. | 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 Underlying, Buy 1 ATM Put Option, Sell 1 OTM Call Option | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Price of Features - Call Premium + Put Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
THE COLLAR Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| THE COLLAR | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Limited | Limited |
THE COLLAR Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| THE COLLAR | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Call Spread, Bull Put Spread | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Limited profit. • A trader can book more profit without this strategy if the prices goes high. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • This strategy protects the losses on underlying asset. • Risk gets limited if the price of the stocks goes down. • Trader can get ownership benefits life dividend and voting rights. | The Risk is limited. |