Short Call Ladder is a strategy that must be devised when the investor is moderately bullish on the market direction and expects volatility to be significant in the market.
A Short Call Ladder strategy is formed by selling “In-the-Money” Call Option, buying one “At-the-Money” Call Option and one “Out-of-the-Money” Call Option.
Maximum gain for the Short Call Ladder strategy is limited if the underlying goes down. Profit is limited to the net premium received.
However, if the underlying rallies explosively, potential profit is unlimited due to the extra Long Call.
Investor view: Neutral on direction and bullish on Stock/ Index volatility.
Reward: Unlimited.Breakeven: Total Strike prices of Long Calls – Strike price of Short Call -/+ net premium received/paid