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Comparision (SHORT PUT LADDER VS RATIO CALL WRITE)

 

Compare Strategies

  SHORT PUT LADDER RATIO CALL WRITE
About Strategy

Short Put Ladder Option Strategy 

This strategy is implemented when a trader is slightly bearish on the market. A trader is required to be bullish over the volatility in the market. It involves sale of an ITM Put Option and buying of 1 ATM & 1 OTM Put Options. However, the risk associated with this strategy is limited.

Ratio Call Write Option Strategy 

This 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.

SHORT PUT LADDER Vs RATIO CALL WRITE - Details

SHORT PUT LADDER RATIO CALL WRITE
Market View Neutral Neutral
Type (CE/PE) PE (Put Option) CE (Call Option)
Number Of Positions 3 2
Strategy Level Advance Beginners
Reward Profile Unlimited Limited
Risk Profile Limited Unlimited
Breakeven Point Upper Breakeven Point = Strike Price of Short Put - Net Premium Received Lower Breakeven Point = Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit

SHORT PUT LADDER Vs RATIO CALL WRITE - When & How to use ?

SHORT PUT LADDER RATIO CALL WRITE
Market View Neutral Neutral
When to use? This strategy is implemented when a trader is slightly bearish on the market. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future.
Action Sell ITM Put Option, Buying 1 ATM & 1 OTM Put Option. Sell 2 ATM Calls
Breakeven Point Upper Breakeven Point = Strike Price of Short Put - Net Premium Received Lower Breakeven Point = Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit

SHORT PUT LADDER Vs RATIO CALL WRITE - Risk & Reward

SHORT PUT LADDER RATIO CALL WRITE
Maximum Profit Scenario When Price of Underlying < Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received Net Premium Received - Commissions Paid
Maximum Loss Scenario Strike Price of Short Put - Strike Price of Higher Strike Long Put - Net Premium Received + Commissions Paid Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid
Risk Limited Unlimited
Reward Unlimited Limited

SHORT PUT LADDER Vs RATIO CALL WRITE - Strategy Pros & Cons

SHORT PUT LADDER RATIO CALL WRITE
Similar Strategies Strap, Strip Variable Ratio Write
Disadvantage • Best to use when you are confident about movement of market. • Small margin required. • Potential loss is higher than gain. • Limited profit.
Advantages • When there is surge in implied volatility, this strategy can give more profit. • Unlimited downside profit. • Limited risk and unlimited reward strategy.

SHORT PUT LADDER

RATIO CALL WRITE