BROWSE

Call Ratio Backspread

What is 'Call Ratio Backspread'

A very bullish investment strategy that combines options to create a spread with limited loss potential and mixed profit potential. It is generally created by selling one call option and then using the collected premium to purchase a greater number of call options at a higher strike price. This strategy has potentially unlimited upside profit because the trader is holding more long call options than short ones.

Explaining 'Call Ratio Backspread'

An investor using this strategy would sell fewer calls at a low strike price and buy more calls at a high strike price. The most common ratios used in this strategy are one short call combined with two long calls, or two short calls combined with three long calls. If this strategy is established at a credit, the trader stands to make a small gain if the price of the underlying decreases dramatically.


Further Reading


Analysis of stochastic orders derived from Economy
digibuo.uniovi.es [PDF]
… Título : Analysis of stochastic orders derived from Economy … design and the analysis of new stochastic orders to be applied in economic decision criteria … investments in financial derivatives, the new integral stochastic orders condor, butterfly and call ratio backspread are defined …

Analysis of stochastic orders derived from economy/estudio de ordenaciones estocásticas derivadas de la economíaAnalysis of stochastic orders derived from economy/estudio de ordenaciones estocásticas derivadas de la economía
dialnet.unirioja.es [PDF]
… Título : Analysis of stochastic orders derived from Economy … design and the analysis of new stochastic orders to be applied in economic decision criteria … investments in financial derivatives, the new integral stochastic orders condor, butterfly and call ratio backspread are defined …

Hedging against a Price Rice Using Vertical Ratio Call Back Spread Strategy Formed by Barrier OptionsHedging against a Price Rice Using Vertical Ratio Call Back Spread Strategy Formed by Barrier Options
www.ceeol.com [PDF]
… Título : Analysis of stochastic orders derived from Economy … design and the analysis of new stochastic orders to be applied in economic decision criteria … investments in financial derivatives, the new integral stochastic orders condor, butterfly and call ratio backspread are defined …

Inverse vertical ratio put spread strategy and its application in hedging against a price dropInverse vertical ratio put spread strategy and its application in hedging against a price drop
www.ceeol.com [PDF]
… Título : Analysis of stochastic orders derived from Economy … design and the analysis of new stochastic orders to be applied in economic decision criteria … investments in financial derivatives, the new integral stochastic orders condor, butterfly and call ratio backspread are defined …

Hedging against a price drop using the inverse vertical ratio put spread strategy formed by barrier optionsHedging against a price drop using the inverse vertical ratio put spread strategy formed by barrier options
www.inzeko.ktu.lt [PDF]
… Título : Analysis of stochastic orders derived from Economy … design and the analysis of new stochastic orders to be applied in economic decision criteria … investments in financial derivatives, the new integral stochastic orders condor, butterfly and call ratio backspread are defined …



Q&A About Call Ratio Backspread


Is the risk limited or unlimited for this strategy?

The risk is limited because you have more long call options than short ones.

Are investors able to use leverage when using Call Ratio Backspread ?

No, they cannot use leverage when using Call Ratio Backspread .

How many short calls are there in this strategy?

There are more long calls than short ones.

What does this strategy combine?

This strategy combines options to create a spread with limited loss potential and mixed profit potential.

What is the name of this strategy?

Call Ratio Backspread.

What is the maximum loss for this investment opportunity?

The most common ratios used in this strategy are one short call combined with two long calls, or two short calls combined with three long calls. If established at a credit, the trader stands to make a small gain if the price of underlying decreases dramatically..

What is the maximum gain for this investment opportunity?

It has potentially unlimited upside profit because you hold more long call options than short ones.

Can losses be greater than gains for an investor using Call Ratio Backspread ?

Yes, losses can be greater than gains if an investor uses Call Ratio Backspread .

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