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Bear Put Ladder
bearishThe Bear Put Ladder is an extension to the Bear Put Spread. By selling another Put at a lower strike, the position is exposed to uncapped risk if the stock falls very fast
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 30-Jun-26 24100 PE | 65 | 108.2 |
| SELL NIFTY 30-Jun-26 22600 PE | 65 | 1.85 |
| SELL NIFTY 30-Jun-26 21100 PE | 65 | 0.85 |
When To Execute?
Bear Put Ladder is to be executed when the trader is mildly bearish for the stock. Premium earned from selling two below strike puts helps to reduce initial outflow. Strategy is mildly bearish.
Trade
Buy 1 lot ATM Put, Sell1 lot lower OTM Put, Sell 1 lot lower deep OTM Put ( All equal quantity)
Advantages
Lower cost and better breakeven point compare to Bear Put Spread. Idle to participate in the stock where downside is limited. Faster time decay could be beneficial for the strategy.
Disadvantages
Uncapped downside if the stock falls
Strategy is ideally meant for advance trader due to risk exposed.
Maximum Profit
Maximum Profit is limited between two OTM Puts. It is difference between higher strike and middle strike less net premium outflow
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 lowest strike put