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Ladder (option combination) In finance, a ladder, also known as a Christmas tree, is a combination of three options of the same type (all calls or all puts) at three different strike prices. [1] A long ladder is used by traders who expect low volatility, while a short ladder is used by traders who expect high volatility.
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The safest angle for a ladder is 75.5°; if it is too shallow, the bottom of the ladder is at risk of sliding, and if it is too steep, the ladder may fall backwards. This angle is achieved by following the 4 to 1 rule for a ladder placed on a vertical wall: for every four feet of vertical height, the ladder foot should move one foot from the wall.
The problem. Crossed ladders of lengths a and b. h is half the harmonic mean of A and B; equivalently, the reciprocals of A and B sum to the reciprocal of h (the optic equation ). Given a, b, and h, find w. Two ladders of lengths a and b lie oppositely across an alley, as shown in the figure. The ladders cross at a height of h above the alley ...
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