Well, What happens if you combine Long Call Christmas Spread with Long Put Christmas Spread?
Let’s understand with an example –
Long Call Christmas Tree Spread
Long Put Christmas Tree Spread
Combining them –
So, if we write them in our old known popular spreads –
The graph will likely have multiple peaks and valleys due to the asymmetric structure of both the call and put Christmas Tree spreads.
Call Spread Contribution: The call spread part of the strategy will have a maximum profit if BANKNIFTY expires close to 45500, with profit potential tapering off if the index moves significantly above 45600 or below 45300.
Put Spread Contribution: The put spread part will similarly have a maximum profit if BANKNIFTY expires close to 45100, with the profit decreasing as the index moves significantly below 45000 or above 45300.
Does it look familiar?
Any guess on the payoff graph? It will look like –
The payoff structure resembles Batman again!
The Batman Spread keeps coming in as an outcome of multiple ratio spreads. But the ranges are smaller but higher here!