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Comparision (LONG CALL VS SHORT CALL LADDER)

 

Compare Strategies

  LONG CALL SHORT CALL LADDER
About Strategy

Long Call Option Strategy

This is one of the basic strategies as it involves entering into one position i.e. buying the Call Option only. Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.

Short Call Ladder Option Strategy 

This strategy is implemented when a trader is moderately bullish on the market, and volatility. It involves sale of an ITM Call Option, buying of an ATM Call Option & OTM Call Option. The risk associated with the strategy is limited.

LONG CALL Vs SHORT CALL LADDER - Details

LONG CALL SHORT CALL LADDER
Market View Bullish Neutral
Type (CE/PE) CE (Call Option) CE (Call Option)
Number Of Positions 1 3
Strategy Level Beginner Level Advance
Reward Profile Unlimited Unlimited
Risk Profile Limited Limited
Breakeven Point Strike Price + Premium Upper Breakeven Point = Total Strike Prices of Long Calls - Strike Price of Short Call + Net Premium Received Lower Breakeven Point = Strike Price of Short Call - Net Premium Received

LONG CALL Vs SHORT CALL LADDER - When & How to use ?

LONG CALL SHORT CALL LADDER
Market View Bullish (Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.) Neutral
When to use? This strategy work when an investor expect the underlying instrument move in upward direction. This strategy is implemented when a trader is moderately bullish on the market, and volatility
Action Buying Call option Sell 1 ITM Call, Buy 1 ATM Call, Buy 1 OTM Call
Breakeven Point Strike price + Premium Upper Breakeven Point = Total Strike Prices of Long Calls - Strike Price of Short Call + Net Premium Received Lower Breakeven Point = Strike Price of Short Call - Net Premium Received

LONG CALL Vs SHORT CALL LADDER - Risk & Reward

LONG CALL SHORT CALL LADDER
Maximum Profit Scenario Underlying Asset close above from the strike price on expiry. Profit Achieved When Price of Underlying > Total Strike Prices of Long Calls - Strike Price of Short Call + Net Premium Received
Maximum Loss Scenario Premium Paid Strike Price of Lower Strike Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid
Risk Limited Limited
Reward Unlimited Unlimited

LONG CALL Vs SHORT CALL LADDER - Strategy Pros & Cons

LONG CALL SHORT CALL LADDER
Similar Strategies Protective Put Short Put Ladder, Strip, Strap
Disadvantage • In this strategy, there is not protection against the underlying stock falling in value. • 100% loss if the strike price, expiration dates or underlying stocks are badly chosen. • Unlimited risk. • Margin required.
Advantages • Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock. • Higher probability of profit. • Unlimited upside profit. • Limited maximum loss.

LONG CALL

SHORT CALL LADDER