Ratio Spread
Sell more options than you buy at different strikes — directional with premium collection.
A ratio spread involves buying a smaller number of options at one strike and selling a larger number at another strike. For example, buy 1 ATM call and sell 2 OTM calls (1:2 ratio). It can be entered for a credit or small debit. Quintal Mind provides real-time ratio spread calculations with configurable multipliers from 2x to 5x.
Strategy Structure
Buy 1 ATM Call + Sell 2 (or more) OTM Calls. Put ratio: Buy 1 ATM Put + Sell 2+ OTM Puts.
Profit & Loss Profile
Market Outlook
Mildly directional — expecting a move to a specific level but not beyond.
When to Use
- You have a specific directional target and don't expect overshoot
- You want to fund a long option by selling 2+ options at a target strike
- IV skew makes OTM options relatively expensive
- You want a potentially free or credit trade with directional exposure
When to Avoid
- When you expect a large trending move beyond the short strikes
- If you cannot actively manage (naked short risk beyond ratio)
- In low IV environments (premium from extra short legs is too small)
- If margin constraints don't allow naked short exposure
Ideal Conditions
- You expect a moderate directional move to the short strike level
- High IV skew (OTM options relatively expensive to sell)
- You can manage the position if the underlying overshoots the target
- Weekly expiry plays where theta rapidly decays the extra short options
Greeks Impact
Directional at entry, becomes flat at the short strike, then reverses beyond it (due to extra short options).
Positive near the long strike, strongly negative near the short strike.
Positive overall (more short options than long) — time works in your favor if price stays near target.
Mixed — negative vega from extra short options. Net negative vega if ratio is 1:2 or higher.
BankNifty Example
Setup: Buy 1× 48000 CE at ₹350, Sell 2× 48300 CE at ₹180 each. Net credit = (2 × 180) - 350 = ₹10. Max profit at 48300 = 300 + 10 = ₹310 per share. Max profit per lot = ₹310 × 15 = ₹4,650.
If profitable: If BankNifty expires at 48300, the long 48000 CE is worth 300, both 48300 CEs expire worthless. Total profit = ₹310 × 15 = ₹4,650.
If loss: If BankNifty rallies to 49000, the extra short call creates a loss. The 48000 CE is worth 1000, each 48300 CE is worth 700. Loss = 1000 - (2 × 700) + 10 = -₹390 × 15 = -₹5,850.
Adjustments & Risk Management
- Buy back the extra short option if the underlying overshoots the target
- Roll the short strikes higher/lower to adjust the max profit point
- Convert to a butterfly by buying a further OTM option to cap risk
- Close early if the underlying reaches the short strike before expiry
Ratio Spreads on Quintal Mind
Quintal Mind provides real-time ratio spread calculations with configurable multipliers — from 1:2 (buy 1, sell 2) up to 1:5 (buy 1, sell 5). The sheet displays the NET value across all strikes and offsets, where negative values indicate a credit (favorable) and positive values indicate a debit.
Higher ratios (1:4, 1:5) collect more premium and have a wider profitable range before the short strike, but carry significantly more risk beyond it. These are typically used by aggressive traders for expiry-day plays where they expect rapid theta decay on the short legs.
Related Strategies
See Ratio Spread in Real-Time
Track live Ratio Spread values across multiple strikes and expiries on Quintal Mind.
Try Quintal Mind Free →