Variable Ratio Spread
Butterfly with unequal ratios
Positions in Chart: Buy 1 lot of 25600 CE + Sell 2 lots of 25800 CE + Buy 1 lot of 26000 CE. Spot price: 25800
Setup
Buy 1 OTM Call + Sell 3 ATM Calls + Buy 2 OTM Call (unequal ratios)
When to Use
- Profit from sideways movement with defined risk
Market Outlook
Volatility Expectation↘Expected to Fall Sharply
Price Direction→Expected to Stay Flat
Risk & Reward
Breakeven PointTwo breakeven points
Max Contract LossNet Premium Paid
Max Position LossSame as Max Contract Loss
Strategy Details
Complexity LevelIntermediate
DirectionNeutral - Not much move
VolatilityFall
Number of Legs3 Leg
Strategy TypeCredit
Hedging CapabilityMinor Hedging
Description
A variable ratio spread is a modified butterfly where the ratios of long and short options differ
Example
If NIFTY is at ₹25,800, you might buy a ₹25,600 Call, sell two ₹25,800 Calls, and buy a ₹26,000 Call.
This information is for educational purposes only and should not be considered as financial advice. Always consult with a qualified financial advisor before making investment decisions. Data is constructed and is not actual. Calculations may have errors.
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