Call Ladder

A Call Ladder is a combination of an in-the-money call, an at-the-money call and another call strike further out-of-the-money of the same expiration date.

Long Call Ladder

Payoff Diagram:

Direction Assumption: Moderately Bullish

Maximum Profit: Limited

Maximum Loss: Unlimited

Breakeven Price: • On the lower end, Long Call strike plus the net debit paid. • On the higher end, 2 Short Call strikes minus Long Call strike minus the net debit paid.

Theta: • If underlying price is trading either below the lower breakeven or above the higher breakeven price -> Negative • If underlying price is trading between the two breakeven prices -> Positive

Volatility: Negative

Short Call Ladder

Payoff Diagram:

Direction Assumption: Moderately Bearish

Maximum Profit: Limited

Maximum Loss: Unlimited

Breakeven Price: • On the lower end, Short Call strike plus the net credit received. • On the higher end, 2 Long Call strikes minus Short Call strike minus the net credit received.

Theta: • If underlying price is trading either below the lower breakeven or above the higher breakeven price -> Positive • If underlying price is trading between the two breakeven prices -> Negative

Volatility: Positive