Compare Strategies
| RATIO CALL WRITE | DIAGONAL BEAR PUT SPREAD | |
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| About Strategy |
Ratio Call Write Option StrategyThis strategy involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. This strategy is used by a trader who is 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.
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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. |
RATIO CALL WRITE Vs DIAGONAL BEAR PUT SPREAD - Details
| RATIO CALL WRITE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 2 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Limited | Limited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
RATIO CALL WRITE Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| RATIO CALL WRITE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Neutral | Bearish |
| When to use? | This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. | 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 | Sell 2 ATM Calls | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
RATIO CALL WRITE Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| RATIO CALL WRITE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Net Premium Received - Commissions Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid | When the stock trades up above the long-term put strike price. |
| Risk | Unlimited | Limited |
| Reward | Limited | Limited |
RATIO CALL WRITE Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| RATIO CALL WRITE | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Variable Ratio Write | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Potential loss is higher than gain. • Limited profit. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | The Risk is limited. |