A highly bullish options strategy which involves selling one or two call options with lower exercise prices and buying two or three call options with higher exercise prices. More specifically, an investor, confident that a strong rise in the underlying is looming, should buy a number of at the money or out of the money call options exceeding that of in the money call options he sells or shorts . The call ratio backspread is a credit spread (particularly a vertical ratio spread) which aims to take advantage of volatile market conditions, where it profits when the underlying asset’s price moves sideways. But in contrast to other credit spreads (like the short butterfly spread and short condor spread), it retains the unlimited profit potential when the underlying’s price breaks out to upside. The profit potential will be limited if the price slides downside. Of course, this bullish strategy, like all bullish strategies, leads to losses if the underlying’s price remains unchanged.
Derivatives
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