Bear Put Ladder Spread

A Bear Put Ladder Spread involves buying one put option at a higher strike price and selling multiple put options at lower strike prices. It profits from limited price decreases but carries risk if the price falls sharply.

• Ideal for moderately bearish conditions, where a limited price drop is expected.
• Selling additional OTM puts increases premium income but caps profit and increases risk for sharp price decreases.
• Risk increases significantly beyond the sold strikes, but profit is capped for moderate price decreases.

Example:

• BANKNIFTY trading at 42,000.
• Buy 42,000 Put at ₹200, sell 41,800 Put at ₹100, and sell 41,600 Put at ₹50 (lot size = 25).
• Outcome:
  1. If BANKNIFTY falls to 41,800 at expiry:
     • Gain on bought put = ₹200 × 25 = ₹5,000.
     • Loss on sold puts = ₹0.
     • Net profit = ₹5,000 − ₹2,500 (net premium) = ₹2,500.
  2. If BANKNIFTY falls to 41,400 at expiry:
     • Gain on bought put = ₹600 × 25 = ₹15,000.
     • Loss on sold puts = ₹200 × 25 = ₹5,000 (41,800 Put) + ₹100 × 25 = ₹2,500 (41,600 Put).
     • Net loss = ₹15,000 − ₹7,500 − ₹2,500 = ₹5,000.
  3. If BANKNIFTY stays above 42,000 at expiry:
     • All options expire worthless.
     • Net loss = ₹2,500.