Online Trading Concepts

Advertisement
Advertisement

Bull Call Ratio Backspread vs Call Option

Call Ratio Backspread

  1. Bull Call Ratio Backspread
  2. Bull Call Ratio Backspread Profit, Loss, & Breakeven
  3. Bull Call Ratio Backspread vs Buying a Call

Both the profit/loss graph at expiration for the Bull Call Ratio Backspread and a call option are given below.

Call Ratio Backspread Profit Loss GraphCall Option profit and loss graph

Break-even

The call is superior than the bull call ratio backspread when it comes to the better upside breakeven.

Profit

The profit for a bull call ratio backspread is less than a call. The profit at a stock price of $55 is given below :

Loss

At a stock price of $50 (i.e. stock didn't move in 30 days) the bull call ratio backspread actually makes money, whereas the call loses money:

However, at a price of $52.50, the bull call ratio backspread is very inferior to the call.

Like all option strategies, the trader's exact expectations have to be considered when deciding the best strategy to use: