The Short Call Ladder strategy and its application in trading and hedging

Abstract

The paper presents a new approach to the formation of Short Call Ladder (SCL) strategy based on the functions of profit. Anoptimal algorithm for the use of this strategy in trading is introduced as well. Furthermore, this paper is focused on the applicationof Short Call Ladder strategy in hedging against a price rise of the underlying asset. In the end, the results are compared with theresults of hedging obtained by Short Combo and Vertical Ratio Call Back Spread option strategy.

Keywords

• hedging
• option strategies
• Short Call Ladder
• Short Combo
• SPDR Gold Shares
• Vertical Ratio Call Back Spread