Compare Strategies
| PUT BACKSPREAD | CALL BACKSPREAD | |
|---|---|---|
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| About Strategy |
Put Backspread Option StrategyIf the trader is bearish on market and bullish in volatility, he will implement this strategy. However the trader can be neutral in nature i.e. indifferent if the market moves in either of the direction, this strategy will make profits, but uptrend will give a capped income than downtrend which will give unlimited returns. |
Call Backspread Option Trading This strategy is adopted by traders who are bullish in nature. He expects market and volatility to rise in the near future. A trader need not be direction specific here (i.e. an upward or downward trend, but a small bias towards an uptrend should always be present, as the gains will be much higher once the market moves up r .. |
PUT BACKSPREAD Vs CALL BACKSPREAD - Details
| PUT BACKSPREAD | CALL BACKSPREAD | |
|---|---|---|
| Market View | Bearish | Bullish |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) |
| Number Of Positions | 2 | 3 |
| Strategy Level | Advance | Advance |
| Reward Profile | Unlimited | |
| Risk Profile | Limited | |
| Breakeven Point | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
PUT BACKSPREAD Vs CALL BACKSPREAD - When & How to use ?
| PUT BACKSPREAD | CALL BACKSPREAD | |
|---|---|---|
| Market View | Bearish | Bullish |
| When to use? | This strategy is used when the investor expects the price of the stock to rise in the future. | |
| Action | Sell 1 ITM Call, BUY 2 OTM Call | |
| Breakeven Point | Lower breakeven = strike price of the short call, Upper breakeven = strike price of long calls + point of maximum loss |
PUT BACKSPREAD Vs CALL BACKSPREAD - Risk & Reward
| PUT BACKSPREAD | CALL BACKSPREAD | |
|---|---|---|
| Maximum Profit Scenario | Unlimited profit potential if the stock goes in upward direction. | |
| Maximum Loss Scenario | Strike Price of long call - Strike Price of short call - Net premium received | |
| Risk | Limited | Limited |
| Reward | Unlimited | Unlimited |
PUT BACKSPREAD Vs CALL BACKSPREAD - Strategy Pros & Cons
| PUT BACKSPREAD | CALL BACKSPREAD | |
|---|---|---|
| Similar Strategies | - | |
| Disadvantage | ||
| Advantages | • Unlimited profit potential. |