BROWSE

Ladder Option

What is 'Ladder Option'

An option that locks-in gains once the underlying reaches predetermined price levels or "rungs," guaranteeing some profit even if the underlying security falls back below these levels before the option expires.

Explaining 'Ladder Option'

For example, consider a ladder call option with an underlying price of 50, with a strike price of 55 and rungs at 60, 65 and 70. If the underlying price reached 62, the profit would be locked-in to be at least 5 (60-55); however, if the underlying reached 71, then the profit would be locked-in to being at least 15 (70-55), even if the underlying falls below these levels before the expiration date.


Further Reading


A ladder of citizen participation
www.tandfonline.com [PDF]
… Therefore we have decided to use hedging against the price rise of underlying asset by our design of Short Call Ladder strategy. When creating secured position we proceed as follows. We sell n put options with strike price x1 and option premium p1S, in the same …

Degree ladder maps: Helping students make earlier, more informed decisions about educational goalsDegree ladder maps: Helping students make earlier, more informed decisions about educational goals
www.tandfonline.com [PDF]
… Therefore we have decided to use hedging against the price rise of underlying asset by our design of Short Call Ladder strategy. When creating secured position we proceed as follows. We sell n put options with strike price x1 and option premium p1S, in the same …

The entrepreneurial ladder and its determinantsThe entrepreneurial ladder and its determinants
www.tandfonline.com [PDF]
… Therefore we have decided to use hedging against the price rise of underlying asset by our design of Short Call Ladder strategy. When creating secured position we proceed as follows. We sell n put options with strike price x1 and option premium p1S, in the same …

The path integral approach to financial modeling and options pricingThe path integral approach to financial modeling and options pricing
link.springer.com [PDF]
… Therefore we have decided to use hedging against the price rise of underlying asset by our design of Short Call Ladder strategy. When creating secured position we proceed as follows. We sell n put options with strike price x1 and option premium p1S, in the same …

Entrepreneurial progress: Climbing the entrepreneurial ladder in Europe and the United StatesEntrepreneurial progress: Climbing the entrepreneurial ladder in Europe and the United States
www.tandfonline.com [PDF]
… Therefore we have decided to use hedging against the price rise of underlying asset by our design of Short Call Ladder strategy. When creating secured position we proceed as follows. We sell n put options with strike price x1 and option premium p1S, in the same …



Q&A About Ladder Option


When were stock index futures first introduced ?

They were first introduced in 1982 by

Who developed Black-Scholes model?

Fischer Black and Myron Scholes developed this model in 1973.

If the underlying reached 71, what would be locked-in to being at least 15 (7-55), even if the underlying falls below these levels before expiration date?

The profit would be locked-in to being at least 15 (7-55), even if the underlying falls below these levels before expiration date.

What does it mean that their work became very important when it was used as part of the formula for determining stock index futures contracts ?

It means that their work became very important when it was used as part of the formula for determining stock index futures contracts .

Why did they develop this model?

They wanted to create an accurate way to price European style options on stocks that could be exercised at any time before expiration date. This would allow investors to accurately price these types of options, which were not being traded at that time because there was no reliable pricing system for them yet. Their work became very important when it was used as part of the formula for determining stock index futures contracts, which were introduced in 1982 by Chicago Mercantile Exchange (CME). These contracts allowed investors to trade stock market indexes such as S&P 500 Index or NASDAQ 100 Index without actually buying shares in individual companies represented by these indexes. In fact, CME's creation was so successful that other exchanges followed suit and created their own versions using similar formulas based on Black-Scholes Model . Today, most exchange traded derivatives are priced using variants of this formula including interest rate swaps, equity options and foreign currency futures among others .

If the underlying price reached 62, what would be locked-in to be at least 5 (6-55)?

The profit would be locked-in to being at least 5 (6-55).

What are some of the characteristics of ladder options?

Ladder options have a range of strike prices and expiry dates.

How do you calculate the value of a ladder option?

You can use Black-Scholes model to calculate the value of a ladder option.

What is a ladder option?

A ladder option locks in gains once the underlying reaches predetermined price levels or "rungs," guaranteeing some profit even if the underlying security falls back below these levels before the option expires.

How does a ladder option work?

The ladder option works by setting up rungs at different prices, and locking in profits when the stock hits those rungs.