Call ratio spread

Construction: read every leg

Opening credit is 20. At 105 the position earns 520. Above 105 the two shorts lose intrinsic twice as fast as the single long gains it, so net slope becomes −100 dollars per stock dollar. Upper breakeven is 110.20 and loss is unbounded beyond it.

Read the ticket before the graph

BUY means you own an option right; SELL means you accept a short-option obligation. Positive quantities are long and negative quantities are short in the calculation. Check quantity, call/put, strike, multiplier and expiry before netting premium.

All legs in this example share November 20, 2026 expiration. The entry observation is October 6, 2026, with fictional QLT at 100. These are independent illustrative premiums, not a current option chain or executable quotes. The terminal diagram assumes every leg and any shares are resolved at one common settlement price.

Before expiry: time and volatility

The two short calls can dominate Gamma and Vega near their strike. Far above all strikes, the ticket behaves like approximately minus 100 shares. A position described as bullish near entry can become short on a large rise.

Manage the position deliberately

Identify uncovered quantity before entry and compare a butterfly with an added upper wing. A roll must be evaluated as a new position. The narrow attractive region does not justify ignoring a remote unlimited tail.

From opening cash to a settlement result

Read the opening instructions: buy 1 100 call at 4.20; sell 2 105 call at 2.20. Option opening cash is $20.00 received as a credit. A received credit is not earned profit while the obligation remains open.

Set the common settlement price to 120.00. Calls have intrinsic value max(S−K,0); puts have max(K−S,0). Subtract the opening premium from each intrinsic value, then multiply by signed quantity and the 100-unit multiplier. Shares contribute their price change from their own cost. The calculation popup shows every leg.

The combined result is $-980.00 before costs and $-981.95 after illustrative opening fees of $1.95. Exit fees, slippage, funding, dividends and taxes are not included. Opening fees are 0.65 per option contract, not a statement of any broker's pricing.

Maximum terminal profit is $520.00; maximum terminal loss magnitude is unbounded in this model, before costs. Isolated zero-P/L settlement points in the model: 110.2. Move the scenario slider across each strike and explain why the slope changes there. A strike is a contract threshold, not a prediction.

This terminal model is useful for comparing risk shapes, but actual American-style assignment, share delivery, forced liquidation or a failed multi-leg exit can produce a different path. A long protective leg is not an automatic instruction that a broker must exercise it when another leg is assigned.

Open the calculation without leaving this lesson

Check your understanding

Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.