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]
- Degree ladder maps: Helping students make earlier, more informed decisions about educational goals – www.tandfonline.com [PDF]
- The entrepreneurial ladder and its determinants – www.tandfonline.com [PDF]
- The path integral approach to financial modeling and options pricing – link.springer.com [PDF]
- Entrepreneurial progress: Climbing the entrepreneurial ladder in Europe and the United States – www.tandfonline.com [PDF]
