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Bull Call Ladder
bullishBull Call Ladder is neutral to Bullish Strategy that offers good return but with higher risk. Strategy entails buying 1 ATM and selling two higher strike OTM call at different strike
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 30-Jun-26 22600 CE | 65 | 1507.7 |
| SELL NIFTY 30-Jun-26 24100 CE | 65 | 101.25 |
| SELL NIFTY 30-Jun-26 25600 CE | 65 | 0.75 |
When To Execute?
To execute a mildly bullish trade by buying 1 ATM call and selling two OTM Calls to reduce initial outflow.
Trade
Buy 1 lot ITM Call, Sell 1 lot ATM and Sell 1 lot higher OTM
Advantages
Bull Call Ladder is best executed in shorter term period to reduce possibility of uncapped risk if the underlying asset rises too much
Disadvantages
Time decay is harmful to the position around the buy strike price and becomes advantageous around the highest strike price
Maximum Profit
It is a Net debit strategy. Maximum Profit is difference between Middle strike and lower Strike Call less net initial outflow
Maximum Loss
Maximum Loss is unlimited if the stock moves above highest strike and second break even