Put Ladder (Bull/Bear)
3 puts at laddered strikes — a put spread plus an extra short put to reduce the cost. Bull or bear depending on orientation.
Profit / Loss Diagram
Bear Put Ladder at expiration
What is this strategy?
The Put Ladder is the all-puts version of the Call Ladder. Typical construction: 1 long ATM put + 1 short middle OTM put + 1 short lower OTM put. The extra sold put reduces the cost but introduces very large downside risk, bounded only by the price floor at zero.
The Bull Put Ladder and the Bear Put Ladder share the same descending-strike construction; what changes is the thesis behind opening it and the point on the ladder where expiration is targeted.
Useful for a moderately bearish outlook, accepting asymmetric downside risk in exchange for a cheap entry.
Construction
| Action | Instrument | Strike | Expiration | Example |
|---|---|---|---|---|
| BUY | 1 Put | ATM (A) | 30-60 DTE | +1 SPY 450 Put |
| SELL | 1 Put | Middle OTM (B) | Same expiry | -1 SPY 445 Put |
| SELL | 1 Put | Low OTM (C) | Same expiry | -1 SPY 435 Put |
Example
SPY at $450, a moderately bearish outlook. Put Ladder 450/445/435.
- Put Purchased (450) −$500 premium paid
- Put Sold (445) +$300 premium received
- Put Sold (435) +$100 premium received
- Net Debit $100
- Maximum Gain $400 with SPY between $435 and $445
- Breakeven $449.00 to the downside; below $431 the position loses again
- Loss if SPY = $400 −$3,100 — the third sold put is uncovered
- Maximum Loss −$43,100 if SPY falls to zero: below $435 you are net short a put
The Greeks
Net delta changes with price: negative above the first sold strike and increasingly positive below the second.
With two sold options against one purchased, net decay works in your favour.
Negative vega: the structure benefits from a fall in implied volatility.
Positive gamma from the purchased put and negative from the two sold. The net turns clearly negative below the lower strike.
Position Management
- 01 Stop at the Lower Sold Strike Close or roll if the underlying approaches the lowest sold strike, which is where the uncovered leg starts to weigh.
- 02 Buy the Fourth Leg if Price Collapses Buying a put below the lower strike converts the structure into defined risk. It costs premium, but it caps the loss at a known figure.
- 03 Size by the Worst Case Work out the loss on a 10% decline before opening. If it is not acceptable, cut contracts before entering.