Compare Strategies
| LONG STRANGLE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
|
|
|
| About Strategy |
Long Strangle Option StrategyA Strangle is similar to Straddle. In Strangle, a trader will purchase one OTM Call Option and one OTM Put Option, of the same expiry date and the same underlying asset. This strategy will reduce the entry cost for trader and it is also cheaper than straddle. A trader will make profits, if the market moves sharply in either direction and gives extra-ordinary returns in the |
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 STRANGLE Vs DIAGONAL BEAR PUT SPREAD - Details
| LONG STRANGLE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | CE (Call Option) + PE (Put Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Lower Breakeven Point = Strike Price of Put - Net Premium, Upper Breakeven Point = Strike Price of Call + Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG STRANGLE Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| LONG STRANGLE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | This strategy is used in special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc. | 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 OTM Call Option, Buy OTM Put Option | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Lower Breakeven Point = Strike Price of Put - Net Premium, Upper Breakeven Point = Strike Price of Call + Net Premium | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
LONG STRANGLE Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| LONG STRANGLE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Profit = Price of Underlying - Strike Price of Long Call - Net Premium Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Max Loss = Net Premium Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
LONG STRANGLE Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| LONG STRANGLE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Long Straddle, Short Strangle | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Require significant price movement to book profit. • Traders can lose more money if the underlying asset stayed stagnant. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Able to book profit, no matter if the underlying asset goes in either direction. • Limited loss to the debit paid. • If the underlying asset continues to move in one direction then you can book Unlimited profit . | The Risk is limited. |