Call Ratio Spread (Front Spread)
Description
Buying one at-the-money call and selling two calls further out of the money, financing most or all of the long call with the extra short premium.
Setup
- Buy one call at the money.
- Sell two calls at a higher strike, same expiry.
Context
Used when a moderate rise up to the short strike is expected, and the trader is willing to accept uncapped risk beyond it in exchange for a very low, or negative, cost of entry.
Risk Profile
Maximum gain occurs at the short strike. Above it, the extra uncovered short call creates loss that grows without bound; below the long strike, the position is flat at its net cost.
Pros
- Very low, sometimes negative, cost of entry.
- Maximum profit at the short strike can be large relative to the cost.
- Benefits from time decay on the short calls.
Cons
- Uncapped risk above the short strike.
- Needs active management if the underlying rallies hard.
Effect of Time
Time decay generally helps, since there are more short options than long ones.
Effect of Volatility
A rise in implied volatility generally hurts the position, since the short calls outnumber the long call.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Long | Call | 1 | $84500.0000 | 24 Sep 2026 | $266.3446 | $295.9385 | $25.3662 |
| Short | Call | 2 | $85000.0000 | 24 Sep 2026 | $88.7815 | $76.0985 | $22.1954 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $84000.0000 | $0.0000 | -$88.7815 | -100.0% |
| $84500.0000 | $0.0000 | -$88.7815 | -100.0% |
| $84553.8500 current | $53.8500 | -$34.9315 | -39.3% |
| $84588.7815 breakeven | $88.7815 | $0.0000 | +0.0% |
| $85000.0000 | $500.0000 | $411.2185 | +463.2% |
| $85411.2185 breakeven | $88.7815 | $0.0000 | +0.0% |
| $85500.0000 | $0.0000 | -$88.7815 | -100.0% |