Ladder Option
Definition of '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. |
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Investopedia explains '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. |
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