Long Call Ladder
Buy one call and sell two higher-strike calls at different strikes — cheap or credit, but with unlimited risk on a strong rally.
What is a Long Call Ladder?
A Long Call Ladder (bull call ladder) extends a bull call spread by selling an additional, further-OTM call. This extra short leg reduces the cost — often to a credit — and widens the profit plateau, but it removes the upper protection, exposing you to unlimited risk if the market rallies hard past the highest strike. It is a range-with-upward-bias strategy that must be actively managed; the extra premium is not free.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Buy 1 ITM Call (lowest strike).
- Sell 1 ATM Call (middle strike).
- Sell 1 OTM Call (highest strike). Often a small net credit.
When to Use It
Use when you are moderately bullish but confident the market will not rally explosively past your top strike by expiry. Best in high IV to maximise the premium sold. Never hold it unmanaged through a strong breakout.
The Greeks
Positive Theta in the plateau, Negative Gamma and Negative Vega above the strikes.
Risks & Considerations
- Unlimited loss on a strong rally past the highest strike — the defining danger.
- Requires active management and a stop or hedge on breakouts.
- Margin similar to a naked short call.
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty 20,000. Buy 19,800 CE ₹280, sell 20,000 CE ₹200, sell 20,300 CE ₹90. Net credit ₹10. Profit plateau ≈ ₹210 × 75 = ₹15,750 between 20,000 and 20,300. Upper breakeven ≈ 20,510 — above that, losses are unlimited, so a hard stop is essential.