Compare Strategies
PUT BACKSPREAD | RISK REVERSAL | |
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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. |
Risk Reversal Option StrategyThis strategy protects an investor from unfavourable price movements in the position but limits the profits can be made on that position. A risk reversal is a hedging strategy that protects a long or short position by using put and call options. In this one option is buying and other is written. In this strategy the trader has to pay a premium, while the written option prod .. |
PUT BACKSPREAD Vs RISK REVERSAL - Details
PUT BACKSPREAD | RISK REVERSAL | |
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Market View | Bearish | Bullish |
Type (CE/PE) | PE (Put Option) | CE (Call Option) + PE (Put Option) |
Number Of Positions | 2 | 2 |
Strategy Level | Advance | Advance |
Reward Profile | Unlimited | |
Risk Profile | Unlimited | |
Breakeven Point | Premium received - Put Strike Price |
PUT BACKSPREAD Vs RISK REVERSAL - When & How to use ?
PUT BACKSPREAD | RISK REVERSAL | |
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Market View | Bearish | Bullish |
When to use? | This strategy can be used for hedging. When an investor want to protect long or short position by using a call and put option. | |
Action | This strategy work when an investor want to hedge their position by buying a put option and selling a call option. | |
Breakeven Point | Premium received - Put Strike Price |
PUT BACKSPREAD Vs RISK REVERSAL - Risk & Reward
PUT BACKSPREAD | RISK REVERSAL | |
---|---|---|
Maximum Profit Scenario | You have unlimited profit potential to the upside. | |
Maximum Loss Scenario | You have nearly unlimited downside risk as well because you are short the put | |
Risk | Limited | Unlimited |
Reward | Unlimited | Unlimited |
PUT BACKSPREAD Vs RISK REVERSAL - Strategy Pros & Cons
PUT BACKSPREAD | RISK REVERSAL | |
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Similar Strategies | - | |
Disadvantage | Unlimited Risk. | |
Advantages | Unlimited profit. |