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.
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. ..
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.