Call Backspread

A call backspread is a high-risk volatility strategy that profits from large upward price movements while collecting initial premium, making it ideal for traders expecting significant bullish breakouts or momentum acceleration. This sophisticated two-leg strategy involves selling one at-the-money call and buying two out-of-the-money calls at higher strikes, creating a position that benefits from explosive upward moves while generating immediate income. The strategy is particularly effective when traders expect major bullish catalysts such as earnings surprises, regulatory approvals, or technical breakouts that could drive substantial price appreciation. Professional traders use call backspreads when they have strong conviction about potential upside acceleration but want to reduce the cost basis through premium collection from the short call. The strategy has limited risk between the strikes but unlimited profit potential above the upper breakeven point, making it suitable for high-conviction bullish scenarios. Risk management involves monitoring the position closely as it approaches the short strike to avoid early assignment

If NIFTY is at ₹25,800, set up: Sell ₹25,800 Call for ₹120, Buy two ₹26,200 Calls for ₹60 each, creating zero net cost with limited risk of ₹400 between strikes but unlimited profit above ₹26,600.