A type of option that allows the investor to lock-in gains on the underlying asset or security once laddee price levels are reached. To illustrate, consider a ladder call option with an underlying price of 20 and a strike price of 22. If the price goes beyond 25 but below 30, the holder would be guaranteed at least a profit of 3 (25 minus the strike price of 22), even put ladder options definitions the price subsequently falls below 20 before the expiration date.
also called lock-step option and step-lock option. Reproduction of all or part of this glossary, in any format, without the written consent of WebFinance, Inc. is prohibited.Disclaimer and Copyright. This strategy allows the investor to make a profit regardless of whether the price of the security goes up or down, assuming the stock price changes somewhat significantly. The long put ladder, or bear put ladder, is a limited profit, unlimited risk strategy in options tradingthat is employed whenthe options trader thinks that the underlying security will experience littlevolatility in the near term.
pyt To setup the long putladder, theoptions trader purchases an in-the-money put, sells an at-the-moneyput and sells another lower strike out-of-the-money putof the same underlying security andexpiration date. Long Put Ladder ConstructionBuy 1 ITM PutSell 1 ATM PutSell 1 OTM PutThe long put ladder can also be seen as an extension of thebear put spread by selling another lower striking put. The purpose of shortinganother put is to further finance the cost of establishing the spread position atthe expense of being exposed to unlimited risk in the event that the underlyingstock price crashes.
Limited Profit PotentialMaximum profit for the long put ladder strategy is lBetter Together. Never miss a trending story with yahoo.comas your homepage. Every new tab put ladder options definitions deginitions Flickr photos and your most recently visited sites. Better Together.