Contents

Bull Put Ladder

Bull Put Ladder can be thought of as a combination of a Bull Put Spread and a Long Put. Usually, a Bull Put spread is set up when the outlook is Bullish. But, in a Bull Put Ladder, an additional Put is bought along with the Bull Put Spread as an adjustment if the outlook turns bearish.

This strategy should be executed below the support line identified for the short term. First, set up a Bull Put Spread and hold it as long as price does not break support. If price breaks the support and turns bearish, immediately buy a lower strike OTM Put to adjust the position and turn it into a Bull Put Ladder.

Trade Set-Up

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Sell Higher Strike Put

Eg: Sell 10000 Put

short put-Finvezto

Buy a slightly Lower Strike or Middle Strike Put

Eg: Buy 9900 Put

Naked Put-Finvezto

Buy another Lower strike Put

Eg: Buy 9800 Put

Naked Put-Finvezto

Bull Put Ladder

 

 

Bull Put ladder-Finvezto

Entry Checklist

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Market Outlook
  • Bull Put Ladder is executed in two phases. In the first phase, you will set up a Bull Put Spread. That is, you will first Sell a Put at a higher strike and Buy a Put at a slightly higher strike. Two legs are established first. When you do this, your outlook is bullish. But, if the market turns bearish against your prediction and breaks the support, you will quickly buy a PUT at a lower strike price to adjust the Bull Put Spread and make it into a Bull Put Ladder.
  • Volatility
  • Execute this strategy when the market volatility is low and on the rise
  • Strike Price
  • Sell the Higher Strike PUT at a strike price below the support zone, preferably OUT-of-the-Money PUTs that expire worthless
  • Buy the lower strike PUTs further Out of the Money
  • Risk Profile

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    Risk [Loss]
  • Maximum Loss is limited and occurs when price ends near the middle strike.
  • Reward [Profit]
  • Maximum profit is unlimited for a Bull Put Ladder when the price falls down significantly
  • Options Greeks Impact

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    Time Decay Impact [Theta]
  • Time decay is helpful around the higher strike PUT and harmful around the lower strike PUTs
  • Volatility impact [Vega]
  • Increase in Volatility is helpful when price is near the lower strike PUTs and harmful when the price is near the higher strike PUT.
  • Trade Management & Exit

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    Exit Conditions
  • There are two ways to exit.
  • If you set this strategy up as Bull Put Spread initially, then you can book profits when the price stays above the support zone. You can book profits as the difference between the spreads keep coming down. You can close the position once you receive 50% of the net premium or manage it with a stop loss once you receive bulk of the premium.
  • But, if the price breaks below the support level, you will buy a PUT to adjust the position. If the price falls significantly, manage the lowest strike PUT with a tight stop loss as there is a huge chance for price to come back and retest the support zone. The lowest strike PUT might decay heavily when that happens. So, it is wise to book profits on the lower strike OTM Put and continue holding the spread.