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Bull Ratio Spread

 Profile Version / Simplified Version / Comprehensive Version

Purpose Of Bull Ratio Spread
1. To Profit From Rising Stocks
2. To Eliminate Upfront Payment For Options
3. To Profit Even If The Stock Remains Stagnant


Expectations Of Bull Ratio Spread
Up and Stagnant


Type Of Spread
Naked Option Selling


How To Use Bull Ratio Spread?
Buy At The Money (ATM) Call Options while simultaneously Sell to open enough Out Of The Money (OTM) Call Options to cover the entire cost of the call options bought.

Buy ATM Call + Sell More OTM Call 		Bull Ratio Spread Risk Graph Learn How To Read This Chart



Profit Potential of Bull Ratio Spread:
The maximum profit potential of a Bull Ratio Spread is attained when the underlying stock closes at the strike price of the short call options. In this respect, the profit potential of a Bull Ratio Spread is limited.

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Profit Calculation of Bull Ratio Spread:
Maximum Return = (Total Credit From Short Call Options + [(Difference in strikes - Price of Long Call) x number of long call contracts])


Risk / Reward of Bull Ratio Spread:
Upside Maximum Profit: Limited

Maximum Loss: Unlimited

Break Even Point of Bull Ratio Spread:
BEP: Strike Price of Short Call Options + [Maximum Profit / (number of short call options - number of long call options)]


Advantages Of Bull Ratio Spread:

  • A profit can be made even if the underlying stock falls through the use of a Bull Credit Ratio Spread.

  • Much higher profit can be made than a Bull Call Spread when the underlying stock closes at the strike price of the short call options.


    Disadvantages Of Bull Ratio Spread:

  • Some brokers may not allow beginners to execute such a strategy.

  • Margin is required.


    Recommended!Trade Bull Ratio Spreads With Best Options Broker, OptionsXpress!




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