Call Ratio Front Spread

Call Ratio Spread is a neutral to bearish strategy with no upside risk. It is doing by selling a far OTM call option to Long Call Vertical Spread. It is also known as the 1CE2CE Strategy.

Setup:

• Buy ATM/OTM Call Option – 1 Lot
• Sell Far OTM Call Options – 2 Lots

Ideal IV Environment: High

Maximum Profit: Distance between the strikes + Credit received

How to Calculate Breakeven(s):

• Upside: Short Call Strike + Maximum Profit Potential ( i.e. Maximum Profit/Lot Size)
• Downside: None

Example:

Here goes an example – https://unofficed.com/options-calculator/?save_id=5dde77e91b195389769397

• Short 32000CE at 70.5 – 2 Lot
• Buy 31900CE at 110 – 1 Lot