7 ExampleABCD is trading at $50.00 on February 25, 2004.Sell short the stock for $49.75.Sell the March 2004 45 strike put for $1.50.You Receive
Stock price  put premium49.75  1.50  51.25
Maximum Risk
Uncapped
Maximum Reward
[Shorted stock price  strike price]  put premium received49.75  45.00  1.50  6.25
Breakeven
Shorted stock price  put premium received49.75  1.50  51.25
Maximum ROI
13.89%
Cushion (from Breakeven)
$1.50 or 3.02%
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3Vertical SpreadsIntroductionVertical spreads are typically defined as two-legged option strategies with differentstrike prices but the same expiration date.Whereas Calendar spreads are two-legged option strategies where both legs sharethe strike but not expiration (hence known as horizontal spreads), vertical spreads arethe complete opposite.Diagonal spreads are so called because both the strikes and the expiration datesare different for both legs.Vertical spreads can be categorized into two types: net debit spreads and net creditspreads. A net debit spread is where you pay a net debit for the trade, thereby making you net long in options. Because you are net long in options, you’re better offgiving yourself plenty of time in terms of the expiration date you choose so thatyou’re not hurt too much by time decay.A net credit spread is where you receive a net credit for the trade, thereby making you net short in options. Because you’re net short in options, you’re better offdoing a short-term trade in terms of the expiration date and allowing time decay todo its work for you.We’ve actually already covered two vertical spread strategies in Chapter 2,“Income Strategies”—the Bull Put and Bear Call spreads. These are net credit verticalspread trades that produce a short-term income. In this chapter, we’re going to coverthe two net debit vertical spreads, and to ensure that the chapter isn’t too short, we’llalso run through the Ladder strategies, which simply contain an extra leg. So, thereare a total of four vertical spread strategies plus four Ladder strategies.The ladders are not popular strategies, and they can be a little confusing, so by allmeans skip those sections if you’re purely looking for the most practical strategiesto use.
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3.1 Bull Call SpreadProficiency
Direction
VolatilityN/A
Intermediate
Bullish
Asset Legs
Max Risk
Max Reward
Strategy Type
Capped
Capital Gain
!
■ Long Call
Capped
■ Short Call
3.1.1 DescriptionThe Bull Call is a vertical spread strategy that creates a net debit in your account. Youbuy a near the money long-term (typically over six months to expiration) call and sella higher strike (typically OTM) call with the same expiration.The net effect of the strategy is to bring down the cost and breakeven on the tradecompared to simply buying the long call. The bought leg is closer to the money thanthe sold leg, so it is more expensive and also has a higher Delta than the OTM soldcall leg. Therefore you don’t want to be over-exposed to time decay, which is at itsmost profound in the last month. When you add the fact that your stock must moveupwards in order for you to reach your breakeven point, bull calls tend to be moresuited to longer-term trades where you need time to be right.The Bull Call Spread requires a bullish outlook because you will make a profitonly when the stock price rises. However, the returns possible on this strategy can bespectacular if you get it right and everything goes in your favor. The bought leg givesyou the leverage, but the sold leg reduces your cost and increases your leverage,though at the expense of capping your upside.Many so-called options instructors advocate the Bull Call Spread because it’s easyto show spectacular potential returns. The key word here is potential. It’s all very welldemonstrating a trade where you can make 400% more than your initial stake, but ifthe stock has to rise by 50% for us to get there, then I’m more likely to look at theodds of that happening, rather than being suckered in by the attractive potential yield.Personally, when I do these, I always look first at where my breakeven point is. If it’snot too far away, then I’ll see if the yield is attractive enough.So, in summary, if the stock falls below the lower (bought) strike, you make yourmaximum loss; if the stock rises to the higher (sold) strike, you make your maximumprofit. In between these points, your breakeven point lies at the lower strike plus thenet debit.
Buy lower strike call
Sell OTM call
Bull Call Spread
Vertical Spreads
Steps to Trading a Bull Call Spread1. Buy lower strike calls.2. Sell the same number of higher strike calls with the same expiration date.Steps In■
Try to ensure that the trend is upward and identify a clear area of support.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
If the stock falls below your stop loss, then sell the Long Call, and if you’renot permitted to trade Naked Calls, then unravel the entire position.
■
In any event, look to unravel the trade at least one month before expiration,either to capture your profit or to contain your losses.
3.1.2 ContextOutlook■
With a Bull Call, your outlook is bullish. You need a rise in the stock price.
Rationale■
To execute a bullish trade for a capital gain while reducing your maximum risk.The sold calls will have the effect of capping your upside but also reducingyour cost basis, risk, and breakeven points.
Net Position■
This is a net debit transaction because your bought calls will be more expensive than your sold calls, which are further out of the money.
■
Your maximum risk on the trade itself is limited to the net debit of the boughtcalls less the sold calls. Your maximum reward on the trade is limited to the difference between the strike prices less your net debit.
Effect of Time Decay■
Time decay is helpful to this position when it is profitable and harmful when itis loss-making. With this trade, you’re incurring a net debit, and the stock mustmove upwards to at least break even. Therefore, you want to trade this type ofstrategy in longer time periods to give yourself enough time to be right. If the
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position remains unprofitable, time decay will work against you because thenearer you are to expiration, the nearer you’ll be to making your maximumloss. When the position moves into profit, then time decay will help becauseyou’ll be getting closer to achieving your maximum profit, which happens atthe expiration date.
Appropriate Time Period to Trade■
It’s safest to trade this strategy on a longer-term basis, preferably with at leastsix months to expiration.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is upward and identify a clear area of support.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Lower Strike—Either ATM or slightly OTM (remember, you’re bullishhere!).
■
Higher Strike—Higher than the bought strike—use online tools to find theoptimum yields and breakeven points at and before expiration.
■
Expiration—Preferably over six months. Use the same expiration date forboth legs.
3.1.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Difference in strikes  net debit]
■
Breakeven
[Lower strike  net debit]
Vertical Spreads
3.1.4 GreeksKey:ExpirationToday – 6 monthsTime(t) – 1 monthRisk ProfileAs the stock pricerises, the Bull Callmoves into profit andreaches the maximumprofit when the stockrises to the higherstrike price.
Risk Profile
Theta
ThetaTime decay is harmfulto the position whenit is OTM and helpfulwhen it is ITM.
DeltaDelta (speed) is positive and is at itsfastest in betweenthe strikes. Noticehow Delta slowsdown when the position is deep ITM orOTM.
Delta
Vega
VegaVolatility is helpful tothe position when itis OTM and harmfulwhen it is ITM.
Gamma
Rho
RhoHigher interest ratesare generally helpfulto the position.
GammaGamma (acceleration)peaks below thelower (bought) strikeand peaks inverselyabove the higher(sold) strike.
3.1.5 Advantages and DisadvantagesAdvantages■
Reduced risk, cost, and breakeven point for a medium- to long-term bullishtrade as compared to buying a call alone.
■
Capped downside (although still 100% of the outlay).
■
The farther away from expiration you are, the more downside protection youhave in the event of the stock declining rapidly.
Disadvantages■
The higher yields only arise if you select significantly higher strikes and theunderlying stock price rises up to the higher of those two strikes.
■
Capped upside if the stock rises.
■
The farther away from expiration you are, the slower you make yourmaximum returns; this is the price you pay for the downside protection.
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3.1.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back the callsyou sold and selling the calls you bought in the first place.
■
Advanced traders may leg up and down as the underlying asset fluctuates upand down. In this way, the trader will be taking smaller incremental profitsbefore the expiration of the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-leg.In this way, they will leave one leg of the spread exposed in order to attempt toprofit from it.
3.1.7 ExampleABCD is trading at $26.00 on May 13, 2004.Buy the January 2005 $27.50 strike call for $1.40.Sell the January 2005 $32.50 strike call for $0.25.Premium bought  premium sold
Net Debit
$1.40  $0.25  $1.15
Maximum Risk
Net debit
$1.15Difference in strikes  net debit
Maximum Reward
$5.00  $1.15  $3.85
Maximum reward is greater than your net debitLower strike  net debit
Breakeven
$27.50  $1.15  $28.65
Max ROI
334.78%
Notice how high our maximum reward is (334.78%), but the stock needs to rise to$32.50 within the next seven to eight months in order for this to happen. Normallywe wouldn’t hold on to expiration, so we’d close the position with around onemonth to go or earlier.
3.2 Bear Put SpreadProficiency
Direction
VolatilityN/A
Intermediate
Bearish
Asset Legs■ Short Put■ Long Put
Max Risk
Max Reward
Strategy Type
Capped
Capital Gain
!
Capped
Vertical Spreads
3.2.1 DescriptionThe Bear Put is a vertical spread strategy that creates a net debit in your account. Youbuy a near the money long-term (typically over six months to expiration) put andsell a lower strike (typically OTM) put with the same expiration.The net effect of the strategy is to bring down the cost and raise the breakevenon the trade compared to simply buying the long put. The bought leg is closer tothe money than the sold leg, so it is more expensive. Therefore, you don’t want tobe over-exposed to time decay, which is at its most profound in the last month.When you add the fact that your stock must move downwards in order for you toreach your breakeven point, Bear Puts tend to be more suited to longer-term tradeswhere you need time to be right.The Bear Put Spread requires a bearish outlook because you will make a profitonly when the stock price falls. However, the possible returns on this strategy can bespectacular if you get it right and everything goes in your favor. The bought leggives you the leverage, but the sold leg reduces your cost and increases your leverage, though at the expense of capping your upside.The Bear Put Spread appears attractive because it can show spectacular potentialreturns. Again, the key word here is potential. It’s all very well demonstrating a tradewhere you can make 400% more than your initial stake, but if the stock must fall by50% for us to get there, then I’m more likely to look at the odds of that happening,rather than being suckered in by the attractive potential yield.So, in summary, if the stock rises above the higher (bought) strike, you make yourmaximum loss; if the stock falls to the lower (sold) strike, you make your maximumprofit. In between these points, your breakeven point lies at the higher strike less thenet debit.
Sell lower strike put
Buy OTM put
Bear Put Spread
Steps to Trading a Bear Put Spread1. Sell lower strike puts.2. Buy the same number of higher strike puts with the same expiration date.Steps In■
Try to ensure that the trend is downward and identify a clear area ofresistance.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
If the stock rises above your stop loss, then sell the Long Put, and if you’renot permitted to trade Naked Puts, then unravel the entire position.
■
In any event, look to unravel the trade at least one month before expiration,either to capture your profit or to contain your losses.
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3.2.2 ContextOutlook■
With a Bear Put, your outlook is bearish. You need a fall in the stock price.
Rationale■
To execute a bearish trade for a capital gain while reducing your maximumrisk. The bought puts will have the effect of capping your downside, while thesold puts will reduce your cost basis, risk, and breakeven points.
Net Position■
This is a net debit transaction because your bought puts will be more expensive than your sold puts, which are further out of the money. (Remember thatcalls and puts work in the opposite way to each other.)
■
Your maximum risk on the trade itself is limited to the net debit of the boughtputs less the sold puts. Your maximum reward on the trade is limited to thedifference between the strike prices less your net debit.
Effect of Time Decay■
Time decay is helpful to this position when it is profitable and harmful when itis loss-making. With this trade, you’re incurring a net debit, and the stock mustmove downwards to at least achieve the breakeven. Therefore, you want totrade this type of strategy in longer time periods to give yourself enough timeto be right. If the position remains unprofitable, time decay will work againstyou because the nearer you are to expiration, the nearer you’ll be to makingyour maximum loss. When the position moves into profit, then time decay willhelp because you’ll be getting closer to achieving your maximum profit, whichhappens at the expiration date.
Appropriate Time Period to Trade■
It’s safest to trade this strategy on a longer-term basis, preferably with at leastsix months to expiration.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is downward and identify a clear area ofresistance.
Vertical Spreads
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
Lower Strike—Lower than the bought strike; use online tools to find the optimum yields and breakeven points at and before expiration.
■
Higher Strike—Either ATM or slightly OTM (remember, you’re bearish here!).
■
Expiration—Preferably over six months. Use the same expiration date for bothlegs.
3.2.3 Risk Profile■
Maximum Risk
[Net debit paid]
■
Maximum Reward
[Difference in strikes  net debit]
■
Breakeven
[Higher strike  net debit]
3.2.4 GreeksKey:ExpirationToday – 6 monthsTime(t) – 1 monthRisk ProfileAs the stock pricefalls, the Bear Putmoves into profit andreaches the maximumprofit when the stockfalls to the lowerstrike price.
Risk Profile
Theta
ThetaTime decay is harmfulto the position whenit is loss-making andhelpful when it isITM.
DeltaDelta (speed) is negative and is at itsfastest in betweenthe strikes. Noticehow Delta slowsdown when the position is deep ITM orOTM.
Delta
Vega
VegaVolatility is helpful tothe position when itis loss-making andharmful when it isprofitable.
Gamma
Rho
RhoHigher interest ratesare generally unhelpful to the position.
GammaGamma (acceleration)peaks inversely belowthe lower (sold) strikeand peaks above thehigher (bought)strike.
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3.2.5 Advantages and DisadvantagesAdvantages■
Reduced risk, cost, and breakeven point for a medium- to long-term bearishtrade as compared to buying a put alone.
■
Capped risk (although still 100% of the outlay).
■
The farther away from expiration you are, the more downside protection youhave in the event of the stock rising rapidly.
Disadvantages■
The higher yields only arise if you select significantly lower strikes andthe underlying stock price declines down to the lower of those twostrikes.
■
Capped upside if the stock falls.
■
The farther away from expiration you are, the slower you make yourmaximum returns; this is the price you pay for the risk protection.
3.2.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back the putsyou sold and selling the puts you bought in the first place.
■
Advanced traders may leg up and down as the underlying asset fluctuates upand down. In this way, the trader will be taking smaller incremental profitsbefore the expiration of the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-leg.In this way, they will leave one leg of the spread exposed in order to attempt toprofit from it.
3.2.7 ExampleABCD is trading at $26.00 on May 13, 2004.Sell the January 2005 20 strike put for $0.35.Buy the January 2005 25 strike put for $1.80.
Vertical Spreads
Net Debit
Premium bought  premium sold$1.80  $0.35  $1.45
Maximum Risk
Net debit$1.45
Maximum Reward
Difference in strikes  net debit$5.00  $1.45  $3.55Maximum reward is greater than your net debit
Breakeven
Higher strike  net debit$25.00  $1.45  $23.55
Max ROI
244.83%
Notice how high our maximum reward is (244.83%), but the stock needs to fall to$20.00 within the next seven to eight months in order for this to happen. Normallywe wouldn’t hold on to expiration, so we’d close the position with around onemonth to go or earlier.
3.3 Bull Put SpreadWe covered the Bull Put Spread in Chapter 2 in Section 2.3 on the basis that it is anincome strategy.It’s also a net credit vertical spread. There’s no need to repeat the entire text here,but the strategy could be placed in either chapter.
3.4 Bear Call SpreadWe covered the Bear Call Spread in Section 2.4 on the basis that it is an income strategy.It’s also a net credit vertical spread. There’s no need to repeat the entire text here,but the strategy could be placed in either chapter.
3.5 Bull Call LadderProficiency
Direction
Volatility
Asset Legs
Max Risk
Max Reward
Strategy Type
Uncapped
Capped
Income
Advanced
Neutral
Low Volatility
■ Long Call■ Short Call■ Short Call
3.5.1 DescriptionThe Bull Call Ladder is an extension to the Bull Call Spread. By shorting another callat a higher strike price, the position assumes uncapped risk potential if the stock soarsupwards. The problem is that now it’s not totally clear if we have a bullish or bearish
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strategy, so we have to designate it as a direction neutral strategy! We’d love the stockto rise to the middle strike price (the first Short Call) but not above the higher shortcall strike price. Anywhere in between the middle and higher strike is ideal.Because of the dangers of uncapped risk, this strategy becomes more appropriatefor a short-term income trade. The net effect of the higher short strike is to reducethe cost and breakeven of the Bull Call Spread and adjust the directional nature ofthe trade. The higher call strike prices are further OTM and will therefore havelower premiums than the lower strike bought call.So, in summary, if the stock falls below the lower (buy) strike, you can make a loss;if the stock rises to anywhere between the middle and upper (short) strikes, you makeyour maximum profit; if the stock rises above the highest strike, then you can makeunlimited losses. The extra leg also ensures that you may have two breakeven points.
Buy call
Sell call
Sell call
Bull Call Ladder
Steps to Trading a Bull Call Ladder1. Buy lower strike calls.2. Sell the same number of middle strike calls with the same expiration date.3. Sell the same number of higher strike calls with same expiration date.Steps In■
Try to ensure that the trend is upward but identify a clear area of supportand resistance.
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
If the stock falls below your stop loss, then sell the long call, and if you’renot permitted to trade naked calls, then unravel the entire position.
3.5.2 ContextOutlook■
A Bull Call Ladder is a Bull Call Spread financed by selling an additional callfurther OTM. Although this strategy has an uncapped risk potential as theunderlying asset rises significantly, with Bull Call Ladders, your outlook isdependent on the relationship between the stock price and the first strikeprice. If we look at the strategy as an extension of a Bull Call Spread, then ouroutlook becomes conservatively bullish. However, for our purposes, we’regoing to call this a direction-neutral strategy.
Rationale■
To execute a direction neutral/conservatively bullish trade for enhancedincome. The lower strike sold calls will have the effect of capping your upside,
Vertical Spreads
and the higher strike sold calls will reduce the cost basis and breakeven further, but at the expense of an uncapped downside.
Net Position■
This can be a net debit or net credit trade because while your bought calls willbe more expensive than your sold calls, you’re selling more calls that you’rebuying. Most of the time this is likely to be a net debit trade.
■
Your maximum risk on the trade is uncapped because you are selling morecalls than you’re buying. Your maximum reward on the trade is limited to thedifference between the middle and lower strike prices less your net debit orplus your net credit.
Effect of Time Decay■
Time decay is harmful to the position around the lower strike price andbecomes more helpful around the highest strike price.
Appropriate Time Period to Trade■
It’s safest to choose a shorter term to expiration in order to reduce the possibility of uncapped risk if the underlying asset rises too much.
Selecting the Stock■
Choose from stocks with adequate liquidity, preferably over 500,000 AverageDaily Volume (ADV).
■
Try to ensure that the trend is upward but identify a clear area of support andresistance.
Selecting the Options■
Choose options with adequate liquidity; open interest should be at least 100,preferably 500.
■
The selection of your option legs really depends on whether you’re using thestrategy as a repair to the Bull Call Spread or as a Bull Call Ladder in its ownright. You really need to use online tools to evaluate the optimum trade inyour chosen context.
■
Lower Strike—Either ATM or slightly OTM.
■
Middle Strike—Higher (further OTM) than the lower strike.
■
Higher Strike—Even further OTM—use online tools to find the optimumyields and breakeven points at and before expiration.
■
Expiration—Because this started as a Bull Call Spread, you’d preferably haveover six months; however, this can become dangerous with a Bull Call Ladder
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because you are now a net seller of options, which typically dictates that ashorter time to expiration is preferable. Use same expiration date for all legs.
3.5.3 Risk Profile■
Maximum Risk
[Uncapped]
■
Interim Risk
[Net debit]
■
Maximum Reward
[Middle strike  lower strike  net debit]
■
Breakeven Down
[Lower strike  net debit]
■
Breakeven Up
[Higher strike  middle strike  lower strike]  net debit
3.5.4 Greeks
Risk ProfileAs the stock pricerises toward the middle strike, the position moves into profit.Maximum profit isachieved betweenthen middle and higher strikes. The position then falls as thestock rises above thehigher strike.
Key:ExpirationToday – 3 monthsTime(t) – 1 monthRisk Profile
Theta
ThetaTime decay is helpfulto the position whenit is profitable.
Delta
Vega
VegaVolatility is unhelpfulto the position whenit is profitable.
Gamma
Rho
RhoHigher interest ratesare generally unhelpful to the positionparticularly when thestock reaches higherlevels.
DeltaDelta (speed) is positive at lower levelsand turns negative asthe position changesdirection.GammaGamma (acceleration)peaks around thelower strike, and theninversely around thehigher strike, indicating how fast the position is moving atthose points.
3.5.5 Advantages and DisadvantagesAdvantages■
Lower cost and breakeven than a Bull Call Spread.
Vertical Spreads
Disadvantages■
Confusing as to whether this is a bullish or bearish strategy.
■
Uncapped downside if the stock rises.
■
Typically used as a repair to a Bull Call Spread; therefore, this is only for moreadvanced traders.
3.5.6 Exiting the TradeExiting the Position■
With this strategy, you can simply unravel the spread by buying back the callsyou sold and selling the calls you bought in the first place.
■
Advanced traders may leg up and down as the underlying asset fluctuates upand down. In this way, the trader will be taking smaller incremental profitsbefore the expiration of the trade.
Mitigating a Loss■
Unravel the trade as described previously.
■
Advanced traders may choose to only partially unravel the spread leg-by-leg.In this way, they will leave one leg of the spread exposed in order to attempt toprofit from it.
3.5.7 ExampleABCD is trading at $26.10 on May 14, 2004.Buy the June 2004 25 strike call for $1.60.Sell the June 2004 $27.50 strike call for $0.20.Sell the June 2004 30 strike call for $0.10.Net Debit
Premium bought  premiums sold$1.60  $0.20  $0.10  $1.30
Interim Risk
Net debit$1.30
Maximum Risk
Unlimited
Maximum Reward
Middle strike  lower strike  net debit$27.50  $25.00  $1.30  $1.20
Breakeven (Downside)
Lower strike  net debit$25.00  $1.30  $26.30
Breakeven (Upside)
Higher strike  middle strike  lower strike  net debit$30.00  $27.50  $25.00  $1.30  $31.20
Max ROI
92.31%
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3.6 Bull Put LadderProficiency
Direction
Volatility
Asset Legs
Max Risk
Max Reward
Strategy Type
Uncapped
Income
!
Advanced
Bearish
High Volatility
■ Long Put
Capped
■ Long Put■ Short Put
3.6.1 DescriptionCan you see now why Ladders are so confusing? Here we have a “Bull Put Ladder,”yet looking at it suggests that it has to be a bearish strategy!The Bull Put Ladder is an extension to the Bull Put Spread. By buying anotherput at a lower strike, the position assumes uncapped reward potential if the stockplummets.The problem is that now it’s not totally clear if we have a bullish or bearish strategy, but because we are net long puts and we have uncapped profit potential if thestock falls, do we have to call this a bearish strategy? The answer lies in the reasonfor the trade and the position of the stock relative to the strikes.Because we’re net long options (and particularly OTM options), we’re better offtrading this as a longer-term strategy in order to counter the effects of time decay.So, in summary, if the stock falls below the lower (buy) strike, we make potentially uncapped profit until the stock reaches zero; if the stock rises to anywherebetween the middle and upper (short) strikes, we make our maximum loss. Theextra leg also ensures that we may have two breakeven points.
Buy put
Buy put
Sell put
Bull Put Ladder
Steps to Trading a Bull Put Ladder1. Buy lower strike puts.2. Buy the same number of middle strike puts with the same expiration date.3. Sell the same number of higher strike puts with same expiration date.Steps In■
Try to ensure you understand the direction of the trend and identify a cleararea of both support and resistance.
Vertical Spreads
Steps Out■
Manage your position according to the rules defined in your Trading Plan.
■
In any event, look to unravel the position at least one month before expiration, either to capture your profit or to contain your losses.
3.6.2 ContextOutlook■
A Bull Put Ladder is a Bull Put Spread with an additional lower bought putfurther OTM. Although this strategy has an uncapped reward as the underlying asset declines significantly, with Bull Put Ladders, your outlook is dependent on the relationship between the stock price and the higher strike price.Because we are buying an additional put leg, we can categorize our outlookhere as being bearish. Typically a Bull Put Ladder arises when a Bull PutSpread has gone wrong and the trader adjusts the position to become bearish.
Rationale■
To execute a bearish trade for