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Comparision (RATIO CALL WRITE VS SHORT PUT LADDER)

 

Compare Strategies

  RATIO CALL WRITE SHORT PUT LADDER
About Strategy

Ratio Call Write Option Strategy 

This strategy involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited.

Short Put Ladder Option Strategy 

This strategy is implemented when a trader is slightly bearish on the market. A trader is required to be bullish over the volatility in the market. It involves sale of an ITM Put Option and buying of 1 ATM & 1 OTM Put Options. However, the risk associated with this strategy is limited.

RATIO CALL WRITE Vs SHORT PUT LADDER - Details

RATIO CALL WRITE SHORT PUT LADDER
Market View Neutral Neutral
Type (CE/PE) CE (Call Option) PE (Put Option)
Number Of Positions 2 3
Strategy Level Beginners Advance
Reward Profile Limited Unlimited
Risk Profile Unlimited Limited
Breakeven Point Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit Upper Breakeven Point = Strike Price of Short Put - Net Premium Received Lower Breakeven Point = Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received

RATIO CALL WRITE Vs SHORT PUT LADDER - When & How to use ?

RATIO CALL WRITE SHORT PUT LADDER
Market View Neutral Neutral
When to use? This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. This strategy is implemented when a trader is slightly bearish on the market.
Action Sell 2 ATM Calls Sell ITM Put Option, Buying 1 ATM & 1 OTM Put Option.
Breakeven Point Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit Upper Breakeven Point = Strike Price of Short Put - Net Premium Received Lower Breakeven Point = Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received

RATIO CALL WRITE Vs SHORT PUT LADDER - Risk & Reward

RATIO CALL WRITE SHORT PUT LADDER
Maximum Profit Scenario Net Premium Received - Commissions Paid When Price of Underlying < Total Strike Prices of Long Puts - Strike Price of Short Put + Net Premium Received
Maximum Loss Scenario Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid Strike Price of Short Put - Strike Price of Higher Strike Long Put - Net Premium Received + Commissions Paid
Risk Unlimited Limited
Reward Limited Unlimited

RATIO CALL WRITE Vs SHORT PUT LADDER - Strategy Pros & Cons

RATIO CALL WRITE SHORT PUT LADDER
Similar Strategies Variable Ratio Write Strap, Strip
Disadvantage • Potential loss is higher than gain. • Limited profit. • Best to use when you are confident about movement of market. • Small margin required.
Advantages • When there is surge in implied volatility, this strategy can give more profit. • Unlimited downside profit. • Limited risk and unlimited reward strategy.

RATIO CALL WRITE

SHORT PUT LADDER