A ratio vertical spread that is constructed using call options. This involves buying one in-the-money call option and simultaneously selling two out-of-the-money call options. Investors bearish on volatility and neutral on market direction can use such a spread in a bid to make limited gains (the difference between the two strike prices minus the net premium paid). The potential losses will be unlimited if the market follows an upside trend, and limited in the opposite direction.
The call ratio vertical spread is the reverse of a call backspread.
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