Compare Strategies
| RATIO PUT WRITE | STOCK REPAIR | |
|---|---|---|
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| About Strategy |
Ratio Put Write Option StrategyThis strategy is implemented by selling (short) the underlying asset in the cash/futures market. Simultaneously, sell ATM Puts double the number of long quantity. This strategy is used by a trader who in 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. |
Stock Repair Option StrategyStock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery. Suppose Mr. X has .. |
RATIO PUT WRITE Vs STOCK REPAIR - Details
| RATIO PUT WRITE | STOCK REPAIR | |
|---|---|---|
| Market View | Neutral | Bullish |
| Type (CE/PE) | PE (Put Option) | CE (Call Option) |
| Number Of Positions | 2 | 3 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Max Profit Achieved When Price of Underlying = Strike Price of Short Puts | Unlimited |
| Risk Profile | Loss Occurs When Price of Underlying < Strike Price of Short Put - Net Premium Received OR Price of Underlying > Strike Price of Short Put + Net Premium Received | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
RATIO PUT WRITE Vs STOCK REPAIR - When & How to use ?
| RATIO PUT WRITE | STOCK REPAIR | |
|---|---|---|
| Market View | Neutral | Bullish |
| When to use? | This strategy is implemented by selling (short) the underlying asset in the cash/futures market. This strategy is used by a trader who in neutral on the market and bearish on the volatility in the near future | Stock Repair Strategy is used to cover up for losses made on long stock position. After the long position suffered losses on stock price fall, a trader will implement this strategy in order to bring down the breakeven price and capping his further losses thereby increasing his probability of loss recovery. |
| Action | Sell 2 ATM Puts | Buy 1 ATM Call, Sell 2 OTM Calls |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Puts + Points of Maximum Profit Lower Breakeven Point = Strike Price of Short Puts - Points of Maximum Profit |
RATIO PUT WRITE Vs STOCK REPAIR - Risk & Reward
| RATIO PUT WRITE | STOCK REPAIR | |
|---|---|---|
| Maximum Profit Scenario | Net Premium Received - Commissions Paid | |
| Maximum Loss Scenario | Price of Underlying - Sale Price of Underlying - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid | |
| Risk | Unlimited | Limited |
| Reward | Limited | Unlimited |
RATIO PUT WRITE Vs STOCK REPAIR - Strategy Pros & Cons
| RATIO PUT WRITE | STOCK REPAIR | |
|---|---|---|
| Similar Strategies | Short Strangle and Short Straddle | |
| Disadvantage | • Potential loss is higher than gain. • Limited profit. | • Management required with all the positions. • Additional loss due to continuous decline in shares as downside risk remains unchanged. |
| Advantages | • This strategy creates an opportunity to recover losses by lowering our breakeven. • No margin required. • No additional downside risk and costs nothing to put on. |