Call Ratio Spread Example:-
Buy x 1 = 40000 CE
Sell x 2 = 40500 CE
Let's decode this above position
Now look at this payoff graph max profit at selling position 40500
If the market expires at 40500 we will gain a max profit of Rs 16000
If the market keeps falling we are at a profit of 1.5-2%
Our breakeven level at 41180
If the market went up after 41180 our position will start showing losses
So if our view is market fall or sideways we can use the Call Ratio Spread
Now we can make different Ratios
For Example:-
40000 CE x 1 Buy
410000 CE x 3 Sell
Let's decode this above position
Now look at this payoff graph max profit at selling position 41000
If the market expires at 41000 we will gain a max profit of Rs 29700
If the market keeps falling we are at a profit of 1-1.5%
Our breakeven level is increased in this case 41600
If the market went up after 41600 our position will start showing losses
So if our view is market fall or sideways we can use the Call Ratio Spread
You can increase your break even by increase your far OTM Call Sell
If you Buy 1 call and sell 4 more OTM Call sell your breakeven increase more
By following risk management this setup can become a holy grail for beginner but follow Max Loss in this setup 2.5% of your capital
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