Ratio Call Spread
Change of the profit/loss profile
Put on a ratio call spread
Mechanics of a Ratio Call Spread
In the section on volatile market positions, you learned how to combine low and high exercise calls or puts to create a backspreads. These positions profited when the price of the underlying instrument made a substantial move in either direction. As their name would suggest, ratio call spreads are the reverse of the call ratio backspread. Instead of profiting from price moves, ratio call spreads will realize a profit when the price of the underlying remains stable.
The following screens will look at the construction of this spread and its characteristics.