ladder option

A type of option that allows the investor to lock-in gains on the underlying asset or security once predetermined price levels are reached. To illustrate, consider a ladder call option with an underlying price of 20 and a strike price of 22. Its predetermined price "rungs" are at 25 and 30. If the price goes beyond 25 but below 30, the holder would be guaranteed at least a profit of 3 (25 minus the strike price of 22), even if the price subsequently falls below 20 before the expiration date. also called lock-step option and step-lock option.

Copyright©2010 by InvestorWords.com. ALL RIGHTS RESERVED.

Reproduction of all or part of this glossary and/or this page, in any format, without written consent is prohibited. If you have questions about this dictionary please feel free to contact us feedback\@\investorguide.com