Call Ratio Back spread option strategy
Call Ratio back spread is extremely bullish strategy that expects high volatility in the stocks. It requires sharp upward move in the stock.
Payoff at expiry
Nifty, lot size 65 · Nifty future 22,650 · 6 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| SELL | ATM Call | 22,650 | 1 | 65 | ₹135.47 |
| BUY | OTM Call | 22,700 | 2 | 130 | ₹112.10 |
How it works
- Sell 1 ATM call at the 22,650 strike for ₹135.47, collecting the premium.
- Buy 2 OTM calls at the 22,700 strike for ₹112.10 each, paying the premium.
- You pay a net ₹5,767 upfront for the position. Your maximum loss is ₹9,017.
Below 22,839 you lose, up to ₹8,699.
Above 22,839 you profit, and profit keeps growing as Nifty rises.
Set-up: Sell 1 lot ATM Call and Buy 2 lots OTM call. Net cost to establish the strategy is very low.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 21,300 | −6% | −₹5,767 |
| 21,950 | −3% | −₹5,767 |
| 22,400 | −1% | −₹5,767 |
| 22,650 | Unchanged | −₹5,767 |
| 22,900 | +1% | +₹3,983 |
| 23,350 | +3% | +₹33,233 |
| 24,000 | +6% | +₹75,483 |
How the Greeks affect it
When to use
Call Ratio Back spread is a bullish strategy that is formed with little or no net cost thereby reducing overall risk. It requires aggressive move in the stock.
- Reduced cost of formulating the strategy. In scenario were implied volatility of call is rising, it provides limited risk. Generates higher return in scenario where stock gives exponential return.
Things to watch
- Loss could be higher if the stock doesn�t give desired move. Not meant for an intermediate trader. Time decay could be harmful to the strategy as we are net long. Strike selection becomes key to success.
Call Ratio Back spread: questions
What is a Call Ratio Back spread strategy?
Call Ratio back spread is extremely bullish strategy that expects high volatility in the stocks. It requires sharp upward move in the stock.
When should you use a Call Ratio Back spread?
Call Ratio Back spread is a bullish strategy that is formed with little or no net cost thereby reducing overall risk. It requires aggressive move in the stock.
How do you set up a Call Ratio Back spread?
Sell 1 lot ATM Call and Buy 2 lots OTM call. Net cost to establish the strategy is very low.
What is the maximum profit of a Call Ratio Back spread?
Maximum Profit is unlimited if the stock moves above higher strike call.
What is the maximum loss of a Call Ratio Back spread?
Maximum loss is difference between the strike plus net outflow or less net inflow.
What is the breakeven of a Call Ratio Back spread?
With Nifty at 22,650, the example on this page breaks even at 22,839 at expiry.