Compare Strategies
CHRISTMAS TREE SPREAD WITH PUT OPTION | RATIO PUT SPREAD | |
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About Strategy |
Christmas Tree Spread with Puts Option StrategyThis Strategy is an advance option strategy that consists of three legs and six total options. In this strategy buying one put at strike price D, skipping strike price C, writes three calls at strike price B, and buying two calls at strike price A for same expiration dates for neutral to bearish forecast. An investor used this strategy to potential returns |
Ratio Put Spread Option StrategyThis strategy involves buying ITM Puts and simultaneously selling OTM Puts, double the number of ITM Puts. This strategy is used by a trader who is 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. |
CHRISTMAS TREE SPREAD WITH PUT OPTION Vs RATIO PUT SPREAD - Details
CHRISTMAS TREE SPREAD WITH PUT OPTION | RATIO PUT SPREAD | |
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Market View | Bearish | Neutral |
Type (CE/PE) | CE (Call Option) | PE (Put Option) |
Number Of Positions | 6 | 3 |
Strategy Level | Advance | Beginners |
Reward Profile | Limited | Limited |
Risk Profile | Limited | Unlimited |
Breakeven Point | Lowest strike prices + the half premium – premium paid | Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts) |
CHRISTMAS TREE SPREAD WITH PUT OPTION Vs RATIO PUT SPREAD - When & How to use ?
CHRISTMAS TREE SPREAD WITH PUT OPTION | RATIO PUT SPREAD | |
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Market View | Bearish | Neutral |
When to use? | This Strategy is used when an investor wants potential returns. | This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. |
Action | Buying one ATM, Selling 3 Puts, Buying one more OTM Put | Buy 1 ITM Put, Sell 2 OTM Puts |
Breakeven Point | Lowest strike prices + the half premium – premium paid | Upper Breakeven Point = Strike Price of Long Put +/- Net Premium Received or Paid, Lower Breakeven Point = Strike Price of Short Puts - (Points of Maximum Profit / Number of Uncovered Puts) |
CHRISTMAS TREE SPREAD WITH PUT OPTION Vs RATIO PUT SPREAD - Risk & Reward
CHRISTMAS TREE SPREAD WITH PUT OPTION | RATIO PUT SPREAD | |
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Maximum Profit Scenario | Equal middle strike price – higher strike price – the premium | Strike Price of Long Put - Strike Price of Short Put + Net Premium Received - Commissions Paid |
Maximum Loss Scenario | Net Debit paid for the strategy. | Strike Price of Short - Price of Underlying - Max Profit + Commissions Paid |
Risk | Limited | Unlimited |
Reward | Limited | Limited |
CHRISTMAS TREE SPREAD WITH PUT OPTION Vs RATIO PUT SPREAD - Strategy Pros & Cons
CHRISTMAS TREE SPREAD WITH PUT OPTION | RATIO PUT SPREAD | |
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Similar Strategies | Butterfly spreads | Short Straddle (Sell Straddle), Short Strangle (Sell Strangle) |
Disadvantage | • Potential profit is lower or limited. | • Unlimited potential risk. • Limited profit. |
Advantages | • The potential of loss is limited. | • Directional strategy so that there is either no upside or downside risk. • Able to profit even if trader is neutral on the market. • Higher probability of profit. |