Ratio spreads and backspreads
Unequal quantities lower entry cost but reshape the tail.

The idea · in two minutes

Jack buys one and sells two; Rose asks him to draw the third slope

Jack buys a 100 call and sells two 110 calls for a net credit of 2 per share. He calls it “a trade that pays me”. Rose asks how many calls he is net short above 110. The answer is one.

Below 100, Jack keeps the 2 credit. Between 100 and 110, the long call adds value. At 110, P&L reaches 12. Above 110, the two short calls add one more dollar of loss per dollar than the single long call gains. At 120, the credit has been offset by 10 of net intrinsic value.

A backspread reverses the quantity balance, usually buying more farther-out options and accepting a middle loss zone for tail exposure. Name alone is not enough: calculate every slope, multiplier, margin requirement and actual entry credit or debit.

• S=90Both legs have no intrinsic value.
• S=100The long call is at its strike.
• S=105The lower-strike long call gains value.
• S=110Peak for this 1×2 ratio example.
• S=120The extra short call reverses the upper slope.
• S=130Loss grows beyond the upper break-even.

Illustrative research examples only. They are not live signals or a recommendation.

The mechanics · payoff and exposure

This example is long one K₁ call and short two K₂ calls, with K₁<K₂ and a net credit C.

S_T is expiry price, K₁/K₂ are strikes, and C is credit received. Each ratio must be evaluated using its own quantities, strikes and signed premium.

Greeks: the directional intuition

Delta

Measures first-order sensitivity to the underlying price.

Gamma

Measures how quickly delta changes as the underlying moves.

Theta

Captures the effect of time passing, all else equal.

Vega

Measures sensitivity to implied volatility.

This example is long one K₁ call and short two K₂ calls, with K₁<K₂ and a net credit C.

Practical context · published observations

1×2 call ratio P&L: read the record with its caveats.

The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.

假設所有腿同時到期、可按模型價格成交；不包括 IV、提前平倉、指派、保證金與費用。 Source ↗ · Methodology ↗