Bullish Patterns
Long Calls
Bull Call Spread
Bull Put Spread
Call Backspread
Long Call Ratio Spread
Naked Put
Synthetic Long Stock
The Collar
Covered Calls
Synthetic Long Call
Synthetic Short Put
Covered Straddle
Covered Strangle
Married Put
Protective Put

Bearish Patterns
Long Puts
Bear Put Spread
Bear Call Spread
Put Backspread
Long Put Ratio Spread
Naked Calls
Synthetic Short Stock
Synthetic Short Stock (split strikes)
Covered Put
Protective Call
Synthetic Short Call
Synthetic Long Put

Long Volatility
Long Straddle
Long Strangle
Short Call Butterfly
Short Put Butterfly
Short Iron Butterfly
Short Call Condor
Short Put Condor
Short Iron Condor
Long Guts
Short Call Ladder
Short Put Ladder
Long Call Synthetic Straddle
Long Put Synthetic Straddle

Short Volatility
Short Straddle
Short Strangle
Long Call Butterfly
Long Put Butterfly
Long Iron Butterfly
Long Call Condor
Long Put Condor
Long Iron Condor
Short Guts
Long Call Ladder
Long Put Ladder
Call Ratio Spread
Short Call Ratio Spread
Put Ratio Spread
Short Put Ratio Spread
Ratio Call Write
Ratio Put Write
Short Call Synthetic Straddle
Short Put Synthetic Straddle
Variable Ratio Write

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Long Call Ladder

Risk: unlimited
Reward: limited

General Description
Entering a long call ladder entails buying (1) lower strike call, selling (1) middle strike call and selling (1) higher strike call (same expiration month). It's can be thought of as a short call ratio spread which staggers the short calls instead of using the same strike. It's also similar to a lower strike bull call spread with an extra naked call at a higher strike.

(draw a long call ladder risk diagram here)

The Thinking
You're confident a stock will trade in a tight range or possibly move up slightly. A bull call spread will profit in such a situation because the decline in value of the long call will be more than offset by the time decay of the short call. Then an additional call is sold at a higher strike. This helps finance the trade and results in a more favorable breakeven level.


XYZ is at $55.00. You buy (1) 50 call for $7.00 and sell (1) 55 call for $3.00. This is a bull call spread. Then you sell (1) 60 call for $1.00. Your net debit is $3.00.

Below the lowest strike, all calls expire worthless, and your loss is the net debit paid when the trade was initiated.

Above the highest strike, all calls expire in-the-money. The profit from the long call will be canceled out by the loss from one of the short calls, and then the remaining short call will increase in value point-for-point with the underlying. For example, at $65, the 50 call will be worth $15 ($8.00 gain), the 55 call will be worth $10 ($7.00 loss) and the 60 call will be worth $5 ($4.00 loss). The net of this is a $3.00 loss.

Between the two higher strikes ($55 and $60), max profitability is achieved. As an example, at $55, the 50 call will be worth $5 ($2.00 loss), and the 55 and 60 calls will expire worthless ($3.00 gain and $1.00 gain). The net of this a $2.00 profit.

The PL chart below graphically shows where this trade will be profitable and at a loss.