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Bear Call Ladder
bullishThe Bear Call Ladder is an extension to the Bear Call Spread. By buying another call at a higher strike, the position assures uncapped reward potential if the stock rises.
Example:
| Instrument | Qty | Price |
|---|---|---|
| SELL NIFTY 30-Jun-26 22600 CE | 65 | 1507.7 |
| BUY NIFTY 30-Jun-26 24100 CE | 65 | 101.25 |
| BUY NIFTY 30-Jun-26 25600 CE | 65 | 0.75 |
When To Execute?
Bear Call Ladder is a Bear Call Spread with an additional buy OTM Call. Outlook is to make capital gain while reducing maximum risk
Trade
Sell 1 lot ITM call, Buy 1 lot ATM Call & Buy 1 lot OTM strike Call (All equal quantity)
Advantages
One can use Bear Call Ladder to repair their loss making Bear Call Spread. You can participate in upside movement of stock while still limiting down side
Disadvantages
Time decay is generally harmful when stock is between lower and middle strike and helpful when stock is surging higher
Clear understanding of the direction of the trend and identification of a clear area of both support and resistance could add value to the payoff
Maximum Profit
Maximum Profit is unlimited beyond Higher strike Call
Maximum Loss
It can be Net debit/ Net credit Strategy depending upon premium received from lower strike Call as we are buying more call then selling them