---
description: "A bearish-adjusted strategy selling a near-ATM put at K1 and buying two lower OTM puts at K2 and K3, arising when a bull put spread is adjusted for a stock that trades lower."
tags: [options, hedging, bearish, ladder]
---

# Bull Put Ladder

**Section**: 2.15 | **Asset Class**: Options | **Type**: Hedging

## Overview
The bull put ladder is a vertical spread consisting of a short put at K1 (near ATM), a long put at K2 (OTM), and a long put at K3 (further OTM, K3 < K2 < K1). A bull put ladder typically arises when a bull put spread goes wrong (the stock trades lower), so the trader buys another OTM put at K3 to adjust the position to bearish.

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

Net debit or credit H

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

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

## Key Conditions / Signals
- Bearish adjustment to a bull put spread that has moved against the trader
- Profits if the stock continues to fall significantly below K3
- Low volatility near K1 environment after adjustment is undesirable

## Notes
The bull put ladder converts a bullish income strategy into a bearish capital gain strategy. The additional long put at K3 limits the maximum loss zone and creates profit on a sharp decline.