Call Vertical Ratio Spread

Psychology:

The call ratio vertical spread consists of buying a single in-the-money call option contract and selling two out-of-the-money call option contracts. The call ratio vertical spread is most suitable when the investor is bearish toward volatility and neutral toward the direction that the underlying asset’s share price shifts. The call ratio vertical spread strategy is comparable to the short strangle. The difference between these two strategies is that the investor is at risk if the underlying asset’s share price decreases.

Risk / Reward:

Maximum Loss: Unlimited for the increase and limited for the decrease.

Maximum Gain: Limited to the total premium received for the option contract.