The bull call spread is expanded by a bull call ladder, which now also contains a short call.
Alias
Long Call Ladder
Details
involves purchasing call options at three different strike prices. This strategy is designed to profit from a rise in the underlying stock price. The maximum profit potential is increased, but limitless danger is also introduced. Although the strategy’s name suggests otherwise, it is actually neutral to slightly optimistic because it has uncapped losses in the event of a significant upward movement.
The trader purchases a call option with a low strike price and also purchases a call option with a higher strike price, while selling a call option with an even higher strike price (this is known as a “call spread”). The trader is betting that the underlying stock price will rise, and profits from the strategy if the stock price goes up.
Breakeven
Leg 1 plus the net debit
Leg 3 minus the net debit
Sweetspot
Stock price to be at Leg 2
Max profit
limited to the difference between the strike prices of the two long call options, minus the premium paid for the options.
Max loss
is unlimited if the stock goes way up.
