Bull Call Ratio Backspread vs Call Option

Both the profit/loss graph at expiration for the Bull Call Ratio Backspread and a call option are given below.

 

 

Break-even

The call is superior than the bull call ratio backspread when it comes to the better upside breakeven.

• Bull Call Ratio Backspread = $54.67
• Call = $53.10

Profit

The profit for a bull call ratio backspread is less than a call. The profit at a stock price of $55 is given below :

• Bull Call Ratio Backspread = $33
• Call = $190

Loss

At a stock price of $50 (i.e. stock didn't move in 30 days) the bull call ratio backspread actually makes money, whereas the call loses money:

• Bull Call Ratio Backspread = $33
• Call = -$60

However, at a price of $52.50, the bull call ratio backspread is very inferior to the call.

• Bull Call Ratio Backspread = -$217
• Call = -$60

Like all option strategies, the trader's exact expectations have to be considered when deciding the best strategy to use:

• Direction of stock move
• Magnitude (size) of stock move
• Time frame of stock move