Long 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.
Bull Put Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to move in an upward trend in the near future. This strategy includes buying of an ‘Out of the Money’ Put Option and selling of ‘In the Money’ Put Option of the same underlying asset and the same expiration date. When you write a Put, you will receive prem ..
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
Strike price of short put - net premium paid
LONG CALL LADDER Vs BULL PUT SPREAD - When & How to use ?
LONG CALL LADDER
BULL PUT SPREAD
Market View
Neutral
Bullish
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.
Bull Put Spread strategy is used when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall.
Action
Buy 1 ITM Call, Sell 1 ATM Call, Sell 1 OTM Call
Buy OTM Put Option, Sell ITM Put Option
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
Strike price of short put - net premium paid
LONG CALL LADDER Vs BULL PUT SPREAD - Risk & Reward
LONG CALL LADDER
BULL PUT SPREAD
Maximum Profit Scenario
Strike Price of Lower Strike Short Call - Strike Price of Long Call - Net Premium Paid - Commissions Paid
Max Profit = Net Premium Received
Maximum Loss Scenario
Price of Underlying - Upper Breakeven Price + Commissions Paid
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Risk
Unlimited
Limited
Reward
Unlimited
Limited
LONG CALL LADDER Vs BULL PUT SPREAD - Strategy Pros & Cons
LONG CALL LADDER
BULL PUT SPREAD
Similar Strategies
Short Strangle (Sell Strangle), Short Straddle (Sell Straddle)
Bull Call Spread, Bear Put Spread, Collar
Disadvantage
• Unlimited risk. • Margin required.
• Limited profit potential. • In loss situations, time decay may go against you.
Advantages
• Reduces capital outlay of bull call spread. • Wider maximum profit zone. • When there is decrease in implied volatility, this strategy can give profit.
• Benefit from the time decay in profit positions but harmful in loss positions. • Profitable when underlying stock price rises, move sideways or marginal drop. • Reduce the downside risk.
