Chapter 06 · Section 6.1

Mechanics of a Ratio Call Spread

To put on a ratio call spread, you:

a) sell one of the lower strike and buy two or more of the higher strike.
• b) buy two or more of the lower strike and sell one of the higher strike.
  No. The position described in answer (b) would have a very heavy bullish bias - yielding a profit if the market rallies. A ratio call spread has limited loss on the downside and unlimited loss on the upside.
  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.