Bull Ratio Spread:

The Bull Ratio Spread could be called as a variation of the Bull Call Spread. Here we expect the stock to move sideways
to slightly higher.
The Position is created by purchasing a call (preferably At-the-money or slightly Out-of-the-money) and selling more than
one calls at a higher strike price in a ratio of 1:2 or 1:3 (preferably near to the target price) with the same expiration (same
month).

The strategy is preferred when the upside seems to be decisively capped.

A short time till expiration is generally preferred for the strategy to take advantage of the time decay in the short options
and not give the stock enough time to move very high in price and produce a loss.

• Maximum Risk: Unlimited on the upside, Limited on the downside to the initial debit paid or none if the position is opened for a credit.
• Maximum Profit: (Short call Strike – Long call strike) +/- Net Premium paid or received.
• Break-even Price:Here there would be two break-even points

(a) Upper break-even point: Strike price of Short calls + Difference in strike prices +/- Net premium paid or received.

(b) Lower Break-even Point: Strike price of long call +/ Net premium paid or Received.

Let us consider an illustration; we are moderately bullish on the Nifty which trades at 8100 and are anticipating not more
than a 150 points move.
We Buy a Jan 8100 Call at Rs. 200 and Sell two Jan 8300 Calls at Rs. 90 each.
The Maximum Risk here is Unlimited on the upside and on the downside it is none (since the position was opened for a
debit i.e. (2*90) – 200 = -20.
The Maximum Profit involved is Difference in strikes +/- Net premium paid or received.
i.e. Rs.180 = (8300-8100) – 20.
Here there would be two Breakeven Points:
(a) Lower breakeven Point (when the strategy starts making profit) Long call strike +/- Net premium paid or received
=Rs 8120 (8100+20).
(b) Upper Breakeven Point (when the strategy starts making a loss) Short Call Strike + Difference in Strikes +/- Net
premium paid or received= Rs.8480 (8300+200-20).

Risk/Reward Profile: