A vertical spread with an extra short option one strike further out, adding premium and an uncapped tail on that side.
A call ladder is long one call, short one higher call and short one higher still. It looks like a bear-call-spread with a bonus credit, and it behaves like one until the underlying runs past the highest strike, at which point the naked contract takes over and losses become open-ended.
Ladders make sense when you want extra income from a range-bound view and genuinely accept the tail. They make no sense as a way to squeeze more credit out of a spread you already found too small, which is how most traders end up in them.
Example: XYZ at $50. Buy the $50 call at $2.30, sell the $55 call at $0.80, sell the $57.50 call at $0.35, for a $1.15 debit. Profit peaks at $55, fades to zero around $61.35, and above that the position loses without limit.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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