← Strategy LabLesson 45 · 4:25
Bear put ladder
Summary
A bear put ladder suits a view that XYZ dips a little, to between $95 and $90. You pay $157 and can make up to $343 anywhere from $95 down to $90; a rise costs only the $157, but below $86.57 the loss deepens, to $8,657 if XYZ went to zero. You break even at $98.43 and $86.57.
Key terms
- bear put ladder
- A bear put spread with one more put sold below it, which makes it cheaper and lifts the top but leaves that put uncovered.
- long put ladder
- Another name for the bear put ladder.
- bear put spread
- Buy a higher-strike put and sell a lower-strike put with the same expiry, paying to open, to profit from a fall.
- uncovered put
- A sold put that the shares you own do not cover, so assignment means buying 100 more shares with extra cash.
- assignment
- When a buyer exercises and you, as the seller of that option, must deliver.
- margin
- Money your broker holds against what a sold position could lose.
Check yourself
Answer each question to see why the right answer is right.
1. What does the lesson's bear put ladder cost to open?
2. XYZ ends at $90 on the last day. What is your result?
3. Where are the two break-evens?
4. If XYZ went all the way to zero, how much would you lose?
5. XYZ drops to $95 right away, with 30 days left. Where are you, and what does time do?
Finished the video and the quiz? .