---
description: "A bullish vertical spread extended by selling a second OTM call at K3 > K2, financing a bull call spread while capping upside and creating unlimited risk above K3."
tags: [options, income, bullish, ladder]
---

# Bull Call Ladder

**Section**: 2.14 | **Asset Class**: Options | **Type**: Income

## Overview
The bull call ladder is a vertical spread consisting of a long call at K1 (near ATM), a short call at K2 (OTM), and a short call at K3 (further OTM, K3 > K2 > K1). It is a bull call spread financed by selling an additional OTM call at K3. This adjusts the outlook from bullish (bull call spread) to conservatively bullish or even non-directional with an expectation of low volatility.

## Construction
- Buy 1 call option at strike K1 (near ATM)
- Sell 1 call option at strike K2 (OTM)
- Sell 1 call option at strike K3 (further OTM, K3 > K2 > K1), same expiry

Net debit or credit H

## Payoff Profile
f_T = (S_T - K1)+ - (S_T - K2)+ - (S_T - K3)+ - H

- Lower breakeven: S*_down = K1 + H  (if H > 0)
- Upper breakeven: S*_up = K3 + K2 - K1 - H
- Max profit: P_max = K2 - K1 - H  (achieved in zone [K2, K3])
- Max loss: L_max = unlimited  (if S_T >> K3)

## Key Conditions / Signals
- Conservatively bullish; expects stock to rise to around K2 but not blow through K3
- Low implied volatility environment expected after entry
- The additional short call at K3 reduces cost but creates unlimited upside risk

## Notes
This is an income strategy in the sense that selling the K3 call finances the spread. However, unlimited loss exposure arises if the stock surges well above K3. Risk management requires a stop-loss above K3.