Chapter 06 · Section 6.1

Mechanics of a call ratio backspread

To put on a call ratio backspread, you:

• a) sell one of the lower strike and buy two or more of the higher strike.
  Yes. By selling an expensive lower strike option and buying two less expensive high strike options, you receive an initial credit for this position. The maximum loss is then equal to: High strike price - Low strike price - Initial net premium received. Continue
  b) buy two or more of the lower strike and sell one of the higher strike.
  c) buy one of the lower strike and sell two or more of the higher strike.
  d) sell two or more of the lower strike and buy one of the higher strike.