Ladder Option is an option that provides for locking in the security gain as soon as the underlying security reaches the predetermined levels of price. Thus it guarantees some amount of profit on the investment even if the price of the underlying security might fall below the determined level before the expiration of the option.
To exemplify, Let’s take a case of a ladder call option having Rs 50 as its underlying price and 55as its strike price. Also assume that it rungs at price of 60, 65 and 70. Now, the profit would be assured if the price, even for once, would touch the level between 60 and 65. If price goes to say 62, minimum profit would be 5, if it goes to say 69, profit would be 10 and so on. This profit would be earned irrespective of the price of the underlying at the expiration of the option.
Tags: expiration of the option, ladder call option, Ladder option
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