Bullish CRS

Call Ratio Spread Strategy

Low-cost bullish trade — but watch out for the hidden risk above.

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What is the Call Ratio Spread Options Strategy?

A Call Ratio Spread is where you buy fewer options than you sell. You buy one call at a lower strike and sell TWO calls at a higher strike. The two you sell pay for the one you buy — so you can enter for very little cost, sometimes even for a credit.

If the stock rises moderately, great. If it rises too much, the two short calls create growing losses. It is a mildly bullish strategy with attractive entry cost but hidden upside risk.

Why is it Called "Call Ratio Spread"?

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"Ratio" = the number bought differs from the number sold (1:2). "Call Spread" = both are call options at different strikes. The unequal ratio creates the unusual risk profile.

How Does the Call Ratio Spread Trade Work?

  1. 1 Step 1 — Pick a stock you expect to rise moderately to a specific level.
  2. 2 Step 2 — Buy 1 call near the current price.
  3. 3 Step 3 — Sell 2 calls at your target level.
  4. 4 Step 4 — The 2 short calls pay for your 1 long call — often near zero cost.
  5. 5 Step 5 — If stock rises to your target, collect max profit. If it surges past, losses grow.

Types of Call Ratio Spread Strategies

Most Common

1×2 Call Ratio Spread (Standard)

Buy 1 lower call, sell 2 higher calls. Near-zero or credit entry. Max profit if stock reaches the sold strike. Unlimited risk above.

1×3 Ratio Spread (Aggressive)

Buy 1, sell 3. Even cheaper but triple the risk. Only for very experienced traders.

When to Use the Call Ratio Spread Strategy?

  • ✓ Mildly bullish with a clear resistance target
  • ✓ When you want a low-cost or free bullish trade
  • ✓ When option premiums are high on the short strikes
  • ✓ In range-bound markets leaning slightly bullish

Profit and Loss of the Call Ratio Spread

Before looking at the chart, here is a plain-English summary of what you can make and what you can lose.

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Maximum Profit

Spread width plus any credit received. At the sold strike.

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Maximum Loss

Unlimited above the upper breakeven. Below: loss = any debit paid (or keep credit).

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Breakeven Point

Upper breakeven = upper strike + max profit amount.

Call Ratio Spread Payoff Diagram

The chart below shows how profit/loss changes with the underlying price at expiry. Green zone = profit, red zone = loss.

Call Ratio Spread Payoff Diagram illustrating profit and loss zones over underlying price0Low priceHigh priceProfitLoss
Illustrative payoff at expiry — not to scale

Call Ratio Spread Example Trade

NIFTY at ₹22,000 Expiry: 30 days
ActionTypeStrikePremium
BuyCall₹22,000-₹350
SellCall₹22,500+₹185 × 2 = +₹370
Net Credit/Debit +₹20 (near-zero cost!)
Max Profit ₹520 — at ₹22,500
Max Loss Unlimited above ₹23,020. Below ₹22,000: keep ₹20 credit.
Breakevens: ₹23,020
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NIFTY rose to ₹22,480. Long call worth ₹480, short calls worth ₹0 each. Profit: ₹500 for a trade that cost nothing.

Pros & Cons of the Call Ratio Spread

✓ Advantages
  • Extremely low entry cost
  • Good profit at moderate target
  • Effective in low-vol markets
  • Can enter for a credit while staying bullish
✗ Disadvantages
  • Unlimited loss above upper strike
  • Complex to manage
  • Needs active monitoring
  • Not for beginners — hidden upside risk

Call Ratio Spread Frequently Asked Questions

Test Yourself

Quick Quiz

Answer all questions and check your score.

1 A Call Ratio Spread buys and sells calls in which ratio?

2 Entry cost of a Call Ratio Spread is typically:

3 Maximum profit on a Call Ratio Spread occurs when:

4 The main hidden risk of a Call Ratio Spread is:

5 Call Ratio Spread vs Bull Call Spread — the key difference is: