1x2 ratio spread, convert on approach
A front ratio call spread buys one at-the-money NIFTY call and sells two calls about 150 points higher. It costs little or even pays a credit, profits most if NIFTY rises gently to the short strike, and carries open-ended risk if it rallies far beyond. This version buys that risk away only when it becomes real: once NIFTY approaches the short strike, it adds a further call to turn the trade into a butterfly.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
In this test the spread lost in most conditions. A rally was the biggest danger, not the hoped-for payoff: the 11 trades during which NIFTY rose more than 1% lost ₹37,482, almost all from one week when NIFTY jumped past the upper breakeven before the wing was added. A flat market within 1% lost ₹8,588 over 24 trades, as the bought ATM call decayed. Calm markets were poor: India VIX below 11.5 lost ₹28,163 over 15 trades with one winner, while VIX above 14.5 made ₹7,196 over 16. Entries after quiet sessions lost ₹55,364 over 24; choppy days made ₹18,187 over 16. Figures are before costs.
About this strategy
- Three trading sessions before the NIFTY weekly expiry, at 15:00, buy one lot of the ATM call.
- In the same expiry, sell two lots of the call nearest 150 points above the ATM strike.
- Check every minute. When NIFTY reaches the short strike minus 30% of the gap between strikes, buy one call one gap above the short strike, making a long call butterfly (or, in buyback mode, buy back the extra short call).
- Until that adjustment, if NIFTY rises above the spread's upper breakeven, close the whole position.
- Otherwise exit everything at 15:15 on expiry day.
Why traders use it
Ratio spreads are a cheap way to express a mildly bullish view: the extra short call pays for most of the long call, and if NIFTY drifts up to the short strike by expiry the payoff is many times the cost. The weakness is the naked call above. Buying the protective wing from the start costs money on every trade, so adding it only when the market actually approaches the short strike keeps that cost to the weeks when it is needed.
The year in plain words
With default settings on NIFTY from 1 Oct 2025 to 30 Sep 2026, the strategy placed 52 weekly trades, won only 33% and lost ₹52,004 before costs, a profit factor of 0.52. After ₹20 per order and bid-ask slippage the loss was ₹78,462. Wins (₹3,320 on average) were barely larger than losses (₹3,098), so the low win rate was not offset. One trade entered on 30 Jan 2026 hit the upper-breakeven stop for a ₹37,050 loss, and February lost ₹43,258. December lost ₹13,956; July (₹9,509) and April (₹9,505) were the best months. The longest losing run was 14 trades, and the maximum drawdown ₹67,846.
What the settings do
Risks
- Before the adjustment there is one naked short call, so an overnight gap higher can cause a loss larger than usual.
- Before the wing is added, a fast jump past the upper breakeven closes the trade at a large loss: one week cost ₹37,050 in this test.
- Two out of three trades lost, so long losing runs are part of the strategy.
- Adding the wing costs extra premium, and on a rally that reverses that cost becomes a further loss.
Who it suits
Traders with a mildly bullish bias who understand ratio spreads and their naked leg, have margin for a short call, and can accept frequent losses and long losing runs; in this test the occasional large payoff did not arrive.
Questions traders ask
What is a 1x2 call ratio spread?
It means buying one call and selling two calls at a higher strike in the same expiry. The trade is cheap or pays a credit, gains most when the price finishes at the short strike, and loses if the price rallies far above it because one short call is uncovered.
Is the call ratio spread profitable on NIFTY?
Not in this test. From 1 Oct 2025 to 30 Sep 2026 on NIFTY it lost ₹52,004 before costs and ₹78,462 after ₹20 per order and bid-ask slippage (statutory charges not included). It won only a third of its 52 trades, and one rally past the breakeven cost ₹37,050. Past results do not guarantee future ones.
How does a ratio spread become a butterfly?
A butterfly is long one lower call, short two middle calls and long one higher call. The ratio spread already has the first two parts, so buying one call above the short strike completes it and caps the upside risk.
What is the upper breakeven of a 1x2 ratio spread?
It is the NIFTY level at expiry where the loss on the extra short call wipes out the spread's gain. Here it is two times the short strike, minus the long strike, plus the net credit. Above it the trade loses money.