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  • Ratio Call Back Spread

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    Rajesh T
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    This document describes a ratio call back spread strategy. The strategy generates unlimited profit if the market moves sharply upwards, and limited profit if it moves down or sideways. To construct it, an investor sells one in-the-money call and buys two out-of-the-money calls, collecting a net credit. The strategy benefits from increases in underlying price and volatility, while time decay negatively impacts the two bought calls. An example uses a current market of 15680, with a 15600 call sold and two 15800 calls bought.

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    This document describes a ratio call back spread strategy. The strategy generates unlimited profit if the market moves sharply upwards, and limited profit if it moves down or sideways. To construct it, an investor sells one in-the-money call and buys two out-of-the-money calls, collecting a net credit. The strategy benefits from increases in underlying price and volatility, while time decay negatively impacts the two bought calls. An example uses a current market of 15680, with a 15600 call sold and two 15800 calls bought.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    9 views1 page

    Ratio Call Back Spread

    Uploaded by

    Rajesh T
    This document describes a ratio call back spread strategy. The strategy generates unlimited profit if the market moves sharply upwards, and limited profit if it moves down or sideways. To construct it, an investor sells one in-the-money call and buys two out-of-the-money calls, collecting a net credit. The strategy benefits from increases in underlying price and volatility, while time decay negatively impacts the two bought calls. An example uses a current market of 15680, with a 15600 call sold and two 15800 calls bought.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Ratio Call Back Spread or Call Back Spread

    If market moves sharp up move we get unlimited profit based on the


    movement and if it moves downside also we get profit but which is
    limited and if the market stays in the range we get limited loss.
    - Market Movement : Should move Steeply upside
    - Construction : SELL 1 ITM CALL and BUY 2 OTM CALLS

    - Net Credit should be there (i.e., premium collection should be greater


    than premium paid)

     Underlying price impact is more


     Time decay will be negative since we have two buy CALLS
     Volatility will be positive since we have two buy CALLS and will increase the
    price if volatility increases.

    Example show Below: Market is around 15680 so 15700 is ATM

    - 15600 is ITM and 15800 is OTM


    - So SELL 15600 CE (1 Lot) and BUY 15800 CE (2 Lots)

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