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Ratio Call Spread
bullishCall Ratio Spread is Neutral to Mildly bullish Strategy. In this we expect stock to remain below upper breakeven point
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 30-Jun-26 24100 CE | 65 | 101.25 |
| SELL NIFTY 30-Jun-26 25600 CE | 130 | 0.75 |
When To Execute?
When you expect decrease in volatility with stock price remaining range bound
Trade
Buy 1 lot ATM call and Sell 2 lots OTM Calls with same expiration date
Advantages
Net credit received act as a cushion for any downside movement in stock
Profitable when stock remains range bound between two strikes as it has higher theta gain
Disadvantages
Uncapped risk if stock rises above higher BEP
Managing the trade if stock rises too fast too early
Comparatively complicated trade for intermediate trader
Maximum Profit
Maximum Profit limited to difference between the strikes plus( the net credit received) or minus( net debit paid) all multiplied by net long contracts
Maximum Loss
Maximum Loss is unlimited above higher breakeven point as you are short more option then being long