Compare Strategies
| LONG CALL LADDER | IRON BUTTERFLY | |
|---|---|---|
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| About Strategy |
Long Call Ladder Option StrategyLong Call Ladder Strategy is an extension to Bull Call Spread Strategy. A trader will be slightly bullish about the market, in this strategy but bearish over volatility. It involves buying of an ITM Call Option and sale of 1 ATM & 1 OTM Call Options. However, the risk associated with this strategy is unlimited and reward is limited. |
Iron Butterfly Option StrategyThis strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. A trader will buy 1 OTM Put Option, sell 1 ATM Put Option, sell 1 ATM Call Option, buy 1 OTM Call Option. Due to offsetting of long and short positions, this strategy bags limited profit with limited risk.
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LONG CALL LADDER Vs IRON BUTTERFLY - Details
| LONG CALL LADDER | IRON BUTTERFLY | |
|---|---|---|
| Market View | Neutral | Neutral |
| Type (CE/PE) | CE (Call Option) | CE (Call Option) + PE (Put Option) |
| Number Of Positions | 3 | 4 |
| Strategy Level | Advance | Advance |
| Reward Profile | Unlimited | Limited |
| Risk Profile | Unlimited | Limited |
| Breakeven Point | Upper Breakeven Point = Total Strike Prices of Short Calls - Strike Price of Long Call - Net Premium Paid, Lower Breakeven Point = Strike Price of Long Call + Net Premium Paid | Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received |
LONG CALL LADDER Vs IRON BUTTERFLY - When & How to use ?
| LONG CALL LADDER | IRON BUTTERFLY | |
|---|---|---|
| Market View | Neutral | Neutral |
| When to use? | This Strategy is an extension to Bull Call Spread Strategy. A trader will be slightly bullish about the market, in this strategy but bearish over volatility. | This strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. |
| Action | Buy 1 ITM Call, Sell 1 ATM Call, Sell 1 OTM Call | Buy 1 OTM Put, Sell 1 ATM Put, Sell 1 ATM Call, Buy 1 OTM Call |
| Breakeven Point | Upper Breakeven Point = Total Strike Prices of Short Calls - Strike Price of Long Call - Net Premium Paid, Lower Breakeven Point = Strike Price of Long Call + Net Premium Paid | Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received |
LONG CALL LADDER Vs IRON BUTTERFLY - Risk & Reward
| LONG CALL LADDER | IRON BUTTERFLY | |
|---|---|---|
| Maximum Profit Scenario | Strike Price of Lower Strike Short Call - Strike Price of Long Call - Net Premium Paid - Commissions Paid | Net Premium Received - Commissions Paid |
| Maximum Loss Scenario | Price of Underlying - Upper Breakeven Price + Commissions Paid | Strike Price of Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid |
| Risk | Unlimited | Limited |
| Reward | Unlimited | Limited |
LONG CALL LADDER Vs IRON BUTTERFLY - Strategy Pros & Cons
| LONG CALL LADDER | IRON BUTTERFLY | |
|---|---|---|
| Similar Strategies | Short Strangle (Sell Strangle), Short Straddle (Sell Straddle) | Long Put Butterfly, Neutral Calendar Spread |
| Disadvantage | • Unlimited risk. • Margin required. | • Large commissions involved. • Probability of losses are higher. |
| Advantages | • Reduces capital outlay of bull call spread. • Wider maximum profit zone. • When there is decrease in implied volatility, this strategy can give profit. | • Less amount of capital investment, steady income with low risk. • Traders can predict maximum loss and profit. • Versatile strategy, investors can transform position into bear call spread or bull put spread easily. |