Compare Strategies
| PROTECTIVE CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
|
|
|
| About Strategy |
Protective Call Option StrategyThis strategy is simply the reversal of the Synthetic Call Strategy. This strategy is implemented when a trader is bearish on the market and expects to go down. Trader will short underlying stock in the cash market and buy either an ATM Call Option or OTM Call Option. The Call Option is bought to protect / hedge the upside risk on the short position. 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. |
PROTECTIVE CALL Vs DIAGONAL BEAR PUT SPREAD - Details
| PROTECTIVE CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| Type (CE/PE) | CE (Call Option) | PE (Put Option) |
| Number Of Positions | 1 | 2 |
| Strategy Level | Beginners | Beginners |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Limited | Limited |
| Breakeven Point | Sale Price of Underlying + Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
PROTECTIVE CALL Vs DIAGONAL BEAR PUT SPREAD - When & How to use ?
| PROTECTIVE CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Market View | Bearish | Bearish |
| When to use? | This strategy is implemented when a trader is bearish on the market and expects to go down. | 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 ATM Call | Sell 1 Near-Month OTM Put Option, Buy 1 Mid-Month ITM Put Option |
| Breakeven Point | Sale Price of Underlying + Premium Paid | This is a dynamic trade with many possible scenarios and future trades, it is impossible to calculate a breakeven. |
PROTECTIVE CALL Vs DIAGONAL BEAR PUT SPREAD - Risk & Reward
| PROTECTIVE CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Maximum Profit Scenario | Sale Price of Underlying - Price of Underlying - Premium Paid | 'Premiums received - Initial premium to execute + Strike price - Stock Price on final month |
| Maximum Loss Scenario | Premium Paid + Call Strike Price - Sale Price of Underlying + Commissions Paid | When the stock trades up above the long-term put strike price. |
| Risk | Limited | Limited |
| Reward | Unlimited | Limited |
PROTECTIVE CALL Vs DIAGONAL BEAR PUT SPREAD - Strategy Pros & Cons
| PROTECTIVE CALL | DIAGONAL BEAR PUT SPREAD | |
|---|---|---|
| Similar Strategies | Put Backspread, Long Put | Bear Put Spread and Bear Call Spread |
| Disadvantage | • Profitable when market moves as expected. • Not good for beginners. | Higher commissions due to additional trades. , Changes maximum profit potential of call or put spreads. |
| Advantages | • Limited risk if the market moves in opposite direction as expected. • Allows you to keep open a profitable position to make further profits. • Unlimited profit potential. | The Risk is limited. |