How to Create a Custom Warp in Adobe Photoshop

The warp transform in Photoshop offers many predefined styles, such as bulge or arc, that, in many cases, will work just fine. In some cases, however, those existing styles are not enough. In this example, a banner will be superimposed on a hot-air balloon and warped to the balloon's shape.

1. Here's the image with the banner layer that I'm starting with.
2. With the banner layer active, I'll go to Edit > Transform > Warp.
3. I'll start by applying a predefined warp style by going to the Options Bar, clicking the Warp menu, and choosing Arch.
4. On the Options Bar, I'll adjust the Bend value until it looks close to the horizontal curve of the balloon (22%).
5. This doesn't create the bulge I need on the sides of the banner, so I'll go back to the Warp menu and select Custom.
6. There's a grid and nodes on the warp transform bounding box. The nodes are, in effect, Bezier handles that can be used to warp the layer. In the image, the horizontal handles are angled upward due to the Arch style I just applied.
7. Here, I've pulled out the side handles to affect the vertical edges of the banner. I've also adjusted the bottom corners of the bounding box to account for the width of the balloon at that point.
8. The transformation is committed by pressing Enter on the keyboard.