• Connect

Bear Put Ladder Option Strategy

Bear Put Ladder Option Strategy

What is Bear Put Ladder Option Strategy?

  • Bear Put Ladder Option Strategy is neutral to Bearish Strategy that offers good return but with higher risk, market expectation would be slightly bearish and subdued volatility. Bear Put Ladder entails buying 1 ATM or 1 ITM Put and selling two lower strike OTM put at different strikes. It could just be an extension or modification over Bear Put Spread.

When to Execute?

  • Bear Put Ladder strategy to be executed when we are moderately bearish on the market and expecting the market to be less volatile. Market should remain between the strike price to be benefitted from the strategy.

What is the Trade?

  • Under Bear Put ladder we buy one strike price At-the-Money (ATM) or In-the-Money (ITM) while selling two OTM PE.

What will be maximum profit?

  • Bull Call Ladder is a Net debit strategy here we will have limited profit; Maximum Profit is limited between two OTM Puts. There is a difference between higher strike and middle strike less net premium outflow.

What will be maximum loss?

  • Strategy has two BEP points. Loss is limited to initial outflow if the stock closes above higher put strike. However, loss is unlimited below the lowest strike put.

What are the advantages?

  • Lower cost and better breakeven point compared to Bear Put Spread. Idle to participate in the stock where downside is limited. Faster time decay could be beneficial for the strategy.

What are the disadvantages?

  • Uncapped downside if the stock falls.. Strategy is ideally meant for advanced traders due to risk exposed.

Example for Bull Call Ladder:

  • Nifty future price is 15700. A Bear Call Ladder can be devised by buy one lot of 15700 Put In-the-Money (ATM) @254 and selling one lot of 15500 PE (OTM) @ 181.90 and selling one more lot of 15300 PE (OTM)@ 126.20. Net Premium Paid or Received = Rs. (54.10). Undefined loss below 15046. Maximum profit is between 15300-15500.