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OptionsMath

Stock Repair Strategy Calculator

Stock repair profit equals stock profit plus long call value minus two short call obligations minus net option debit.

Expiration scenarios

Solution

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Stock Repair Strategy Formula

A stock repair strategy overlays a 1x2 call spread on long stock.

Worked Examples

Load these examples to compare common stock repair strategy payoff outcomes.

STOCK REPAIR

Overlay a 1x2 call spread

The stock is below cost basis and the overlay targets a partial recovery.

  • Enter the manual prices and assumptions.
  • Review the calculated risk, reward, and break-even metrics.
  • Compare the chart with the highlighted scenario.

Result: the calculator updates the scenario metrics and chart from those inputs.

Real fills, fees, and broker margin rules are not modeled.

How It Works

A stock repair strategy uses a 1x2 call spread to improve recovery on underwater shares without adding much capital.

Example Problem

Own shares below cost basis, buy one call, and sell two higher-strike calls.

  1. Calculate the overlay debit or credit.
  2. Add stock P/L.
  3. Add long call value and subtract two short call obligations.
  4. Compare repaired break-even with original basis.

Upside is capped and assignment can occur on the short calls.

Key Concepts

The overlay can accelerate recovery up to the short strike but gives up further upside.

Applications

  • Managing underwater stock.
  • Comparing repair strikes.
  • Estimating capped recovery outcomes.

Common Mistakes

  • Ignoring the two short calls.
  • Using repair overlays on stock you do not want called away.
  • Forgetting dividends and assignment.

Frequently Asked Questions

What does the Stock Repair Strategy Calculator calculate?

It calculates the selected options result from manual inputs, without requiring live stock or option quotes.

Does this calculator need live market data?

No. Enter the prices, premiums, volatility, days, or Greeks yourself. The calculator uses those manual inputs only.

Are commissions, taxes, margin interest, and assignment fees included?

No. The result excludes commissions, fees, taxes, borrow costs, slippage, and broker-specific margin rules.

Why can real trading results differ?

Real option prices can change with implied volatility, liquidity, dividends, early assignment, and execution prices.

Reference: Standard options payoff, probability, and risk-management formulas.

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