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Comparision (LONG CALL VS SHORT PUT LADDER)

 

Compare Strategies

  LONG CALL SHORT PUT 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 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.

LONG CALL Vs SHORT PUT LADDER - Details

LONG CALL SHORT PUT LADDER
Market View Bullish Neutral
Type (CE/PE) CE (Call Option) PE (Put 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 = 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

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

LONG CALL SHORT PUT 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 slightly bearish on the market.
Action Buying Call option Sell ITM Put Option, Buying 1 ATM & 1 OTM Put Option.
Breakeven Point Strike price + Premium 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

LONG CALL Vs SHORT PUT LADDER - Risk & Reward

LONG CALL SHORT PUT LADDER
Maximum Profit Scenario Underlying Asset close above from the strike price on expiry. When Price of Underlying < Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received
Maximum Loss Scenario Premium Paid Strike Price of Short Put - Strike Price of Higher Strike Long Put - Net Premium Received + Commissions Paid
Risk Limited Limited
Reward Unlimited Unlimited

LONG CALL Vs SHORT PUT LADDER - Strategy Pros & Cons

LONG CALL SHORT PUT LADDER
Similar Strategies Protective Put Strap, Strip
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. • Best to use when you are confident about movement of market. • Small margin required.
Advantages • Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock. • When there is surge in implied volatility, this strategy can give more profit. • Unlimited downside profit. • Limited risk and unlimited reward strategy.

LONG CALL

SHORT PUT LADDER