Compare Strategies
| LONG PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
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| About Strategy |
Long Put Ladder Option StrategyLong Put Ladder can be implemented when a trader is slightly bearish on the market and volatility. It involves buying of an ITM Put Option and sale of 1 ATM & 1 OTM Put Options. However, the risk associated with this strategy is unlimited and reward is limited. Risk:< |
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 PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | PE (Put Option) | PE (Put Option) |
| Number Of Positions | 3 | 2 |
| Strategy Level | Advance | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Long Put - Net Premium Paid, Lower Breakeven Point = Total Strike Prices of Short Puts - Strike Price of Long Put + Net Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | This Strategy can be implemented when a trader is slightly bearish on the market and volatility. | 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 ITM Put, Sell 1 ATM Put, Sell 1 OTM Put | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Upper Breakeven Point = Strike Price of Long Put - Net Premium Paid, Lower Breakeven Point = Total Strike Prices of Short Puts - Strike Price of Long Put + Net Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Long Put - Strike Price of Higher Strike Short Put - Net Premium Paid - Commissions Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | When Price of Underlying < Total Strike Prices of Short Puts - Strike Price of Long Put + Net Premium Paid | When the stock trades up above the long-term put strike price. |
| Risk | Unlimited | Limited |
| Reward | Limited | Limited |
LONG PUT LADDER Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG PUT LADDER | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Short Strangle (Sell Strangle), Short Straddle (Sell Straddle) | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Unlimited risk. • Margin required. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Reduces capital outlay of bear put spread. • Wider maximum profit zone. • When there is decrease in implied volatility, this strategy can give profit. | The Risk is limited. |