{"id":2271,"date":"2026-09-28T05:39:48","date_gmt":"2026-09-28T05:39:48","guid":{"rendered":"https:\/\/entri.app\/explore\/?post_type=curriculum&#038;p=2271"},"modified":"2026-09-28T13:30:05","modified_gmt":"2026-09-28T13:30:05","slug":"ratio-spread-options-strategy","status":"publish","type":"curriculum","link":"https:\/\/entri.app\/explore\/stock-market\/ratio-spread-options-strategy\/","title":{"rendered":"Ratio Spread Options Strategy"},"content":{"rendered":"<h2><strong>What is it?<\/strong><\/h2>\n<p>A ratio spread means buying a certain number of options and selling a larger number of options of the same type i.e. calls or puts on the same underlying and expiry. The most common setup is a <strong>1:2 ratio<\/strong>: buy 1 option and sell 2 options at a different strike price.<\/p>\n<p>Traders in India use ratio spread options mostly on Nifty and Bank Nifty. This is because these contracts are liquid and expire weekly or monthly.<\/p>\n<h2><strong>Types of Ratio Spreads<\/strong><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Type<\/strong><\/td>\n<td><strong>Structure<\/strong><\/td>\n<td><strong>Market View<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Call Ratio Spread<\/td>\n<td>Buy 1 lower-strike Call, sell 2 higher-strike Calls<\/td>\n<td>Mildly bullish<\/td>\n<\/tr>\n<tr>\n<td>Put Ratio Spread<\/td>\n<td>Buy 1 higher-strike Put, sell 2 lower-strike Puts<\/td>\n<td>Mildly bearish<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><strong>How a Call Ratio Spread Works<\/strong><\/h2>\n<p>Let\u2019s go through a quick example. Here Nifty is at 25,000 and the lot size is 100. We have chosen these numbers to make calculation easy.<\/p>\n<ul>\n<li>Buy 1 lot of 25,000 Call at \u20b9200<\/li>\n<li>Sell 2 lots of 25,200 Call at \u20b9100 each<\/li>\n<li><strong>Net premium:<\/strong> \u20b9200 paid \u2013 \u20b9200 received = <strong>\u20b90 (zero-cost trade)<\/strong><\/li>\n<\/ul>\n<h2><strong>Payoff at Expiry<\/strong><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Nifty at Expiry\u00a0<\/strong><\/td>\n<td><strong>Result (per lot)\u00a0<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Below 25,000<\/td>\n<td>\u20b90 (all options expire worthless)<\/td>\n<\/tr>\n<tr>\n<td>25,200<\/td>\n<td>Maximum profit: \u20b920,000<\/td>\n<\/tr>\n<tr>\n<td>25,400<\/td>\n<td>\u20b90 (breakeven)<\/td>\n<\/tr>\n<tr>\n<td>Above 25,400<\/td>\n<td>Loss increases with every point<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><strong>Key Numbers<\/strong><\/h2>\n<ul>\n<li><strong>Maximum profit:<\/strong> Gap between strikes (200 points) \u00d7 lot size, plus any net credit, minus any net debit<\/li>\n<li><strong>Upper breakeven:<\/strong> Higher strike + maximum profit points (25,200 + 200 = 25,400)<\/li>\n<li><strong>Maximum loss:<\/strong> Unlimited on the upside, because you have one extra short call<\/li>\n<\/ul>\n<h2><strong>When to Use it<\/strong><\/h2>\n<ul>\n<li>You expect the market to rise <strong>slowly and modestly<\/strong><\/li>\n<li>You expect the index to stay near your sold strike by expiry<\/li>\n<li>Implied volatility (India VIX) is high, so option premiums are rich<\/li>\n<li>You want to reduce or eliminate the upfront cost<\/li>\n<\/ul>\n<h2><strong>Advantages<\/strong><\/h2>\n<ul>\n<li>Can be entered at <strong>zero cost or even a small credit<\/strong><\/li>\n<li>No loss if the market falls (in a call ratio spread with no net debit)<\/li>\n<li>Good profit if the market ends near the sold strike<\/li>\n<li>Benefits from time decay (theta) on the sold options<\/li>\n<\/ul>\n<h2><strong>Risks<\/strong><\/h2>\n<ul>\n<li><strong>Unlimited loss<\/strong> if the market rallies sharply<\/li>\n<li>Requires <strong>high margin<\/strong>, since you sell naked options<\/li>\n<li>A sudden jump in volatility hurts the position<\/li>\n<li>Needs active monitoring, especially on expiry day<\/li>\n<\/ul>\n<h2><strong>Practical Tips for Indian Traders<\/strong><\/h2>\n<ul>\n<li><strong>Margin:<\/strong> Brokers block SPAN plus exposure margin for the extra short leg. Check the margin calculator before trading.<\/li>\n<li><strong>Costs:<\/strong> Factor in brokerage, STT, exchange charges, GST and stamp duty, as four legs&#8217; worth of orders add up.<\/li>\n<li><strong>Risk control:<\/strong> Set a stop-loss or exit if Nifty moves close to the upper breakeven.<\/li>\n<li><strong>Hedging:<\/strong> Buy a far out-of-the-money call to cap the unlimited risk. This converts it into a more defined-risk structure.<\/li>\n<li><strong>Expiry choice:<\/strong> Weekly expiries offer faster time decay but need closer tracking.<\/li>\n<\/ul>\n<h2><strong>Quick Comparison<\/strong><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Feature<\/strong><\/td>\n<td><strong>Call Ratio Spread<\/strong><\/td>\n<td><strong>Bull Call Spread<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Legs<\/td>\n<td>Buy 1, sell 2<\/td>\n<td>Buy 1, sell 1<\/td>\n<\/tr>\n<tr>\n<td>Upfront cost<\/td>\n<td>Zero or low<\/td>\n<td>Moderate<\/td>\n<\/tr>\n<tr>\n<td>Profit potential<\/td>\n<td>Limited<\/td>\n<td>Limited<\/td>\n<\/tr>\n<tr>\n<td>Upside risk<\/td>\n<td>Unlimited<\/td>\n<td>Limited<\/td>\n<\/tr>\n<tr>\n<td>Margin needed<\/td>\n<td>High<\/td>\n<td>Low<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><strong>Summary<\/strong><\/h2>\n<ul>\n<li>Buy fewer options, sell more options at a different strike<\/li>\n<li>Best for a <strong>moderate, controlled price move<\/strong> toward your sold strike<\/li>\n<li>Low or zero cost, however carries with <strong>unlimited risk<\/strong> on one side<\/li>\n<li>Never miss to check margin requirements, costs and volatility before entering<\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td colspan=\"2\">\n<p style=\"text-align: center;\"><b>Also Read<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/exponential-moving-average-ema\/\" target=\"_blank\" rel=\"noopener\"><b>Exponential Moving Average (EMA)<\/b><\/a><b>\u00a0<\/b><\/td>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/pivot-points-trading\/\" target=\"_blank\" rel=\"noopener\"><b>Pivot Points Trading<\/b><\/a><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/candlestick-chart-basics\/\" target=\"_blank\" rel=\"noopener\"><b>Candlestick Chart Basics<\/b><\/a><\/p>\n<\/td>\n<td style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/bollinger-bands\/\" target=\"_blank\" rel=\"noopener\"><b>Bollinger Bands<\/b><\/a><b>\u00a0<\/b><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/swing-trading-technical-strategies\/\" target=\"_blank\" rel=\"noopener\"><b>Swing Trading Technical Strategies<\/b><\/a><b>\u00a0<\/b><\/td>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/stock-selection-method-for-swing-trading\/\" target=\"_blank\" rel=\"noopener\"><b>Stock Selection Method for Swing Trading\u00a0<\/b><\/a><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/introduction-to-swing-trading\/\" target=\"_blank\" rel=\"noopener\"><b>Introduction to Swing Trading<\/b><\/a><\/p>\n<\/td>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/adjusting-option-selling-strategies\/\" target=\"_blank\" rel=\"noopener\"><b>Adjusting Option Selling Strategies<\/b><\/a><b>\u00a0<\/b><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>What is it? A ratio spread means buying a certain number of options and selling a larger number of options of the same type i.e. calls or puts on the same underlying and expiry. The most common setup is a 1:2 ratio: buy 1 option and sell 2 options at a different strike price. Traders [&hellip;]<\/p>\n","protected":false},"author":14,"featured_media":0,"template":"","meta":{"_acf_changed":false},"curriculum-category":[111,112,145],"custom_linking_tags":[],"class_list":["post-2271","curriculum","type-curriculum","status-publish","hentry","curriculum-category-stock-market","curriculum-category-stock-market-tutorials","curriculum-category-futures-and-options-trading"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Ratio Spread Options Strategy<\/title>\n<meta name=\"description\" content=\"Here is all you need to know about Ratio Spread Options Strategy from the basics.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/entri.app\/explore\/stock-market\/ratio-spread-options-strategy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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