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Ratio Spread Calculator

Model your ratio spread before you place it. Enter your strikes, premiums, and contract quantities to instantly see max profit, max loss, breakeven, and a full P&L diagram for your ratio spread position.

Unequal Contract Ratios Often Entered for Credit Calls or Puts Interactive P&L Diagram
Black-Scholes-Merton pricing with dividend yield; American-style early exercise available below.

Underlying Asset

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Strategy Template (optional, pre-fills legs below)

Option Legs

Implied volatility is solved automatically from the premium you enter (still editable). Legs with different expirations are supported (calendar spreads). Fetch a price above to pick strikes and premiums from the live option chain.

Getting Started

How to Use This Calculator

Enter your option legs with the correct quantities and the calculator handles the rest. Results update instantly as you type.

1

Pull current market data (optional)

Type a ticker like AAPL and click Get Price. The calculator fills in the current stock price, dividend yield, and the risk-free rate from the 13-week T-bill, then loads the option chain so you can pick actual strikes and premiums.

2

Set up your ratio spread legs

The ratio spread legs are preloaded for you. Pick each strike, expiration, and premium straight from the option chain, or type your own numbers. The calculator works out implied volatility from the premium you enter, and you can still edit it.

3

Calculate and read the results

Click Calculate P&L to see max profit, max loss, breakeven, return on risk, and probability of profit, plus position Greeks: delta, gamma, theta, vega, and rho.

4

Stress test before you trade

Drag the view-date slider to see your P&L curve on any day before expiration, shift implied volatility up or down 50 points, and scan the price-by-date P&L table to see how the trade behaves across scenarios.

This ratio spread calculator prices each leg with your choice of an American-style binomial model (the default for US equity options) or European Black-Scholes-Merton, and accounts for dividend yield. You can set a per-contract commission, copy a shareable link to your exact setup, download the chart as a PNG, and switch to dark mode.

Strategy Breakdown

Understanding the Ratio Spread

Key numbers every ratio spread trader needs to know before entering the position.

Max Profit
Stock at Short Strike at Expiry
Maximum profit occurs when the stock closes exactly at the short strike at expiration. The long option captures the full width between the two strikes, both short options expire worthless, and you keep any net credit from entry. Max profit = strike width × 100 +/− net credit or debit.
Upside Risk (Call Ratio)
Theoretically Unlimited
Above the upper breakeven, the extra uncovered short call creates losses that increase with every point the stock rises. This is the primary risk of a call ratio spread and the reason many traders set a stop-loss or close the position if the stock approaches the upper breakeven.
Downside (Below Long Strike)
Limited to Net Debit (or Keep Credit)
If entered for a net credit, the position keeps that credit when the stock drops below the long strike. If entered for a net debit, the max downside loss is limited to that debit. Either way, the downside risk is defined and capped.

A ratio spread uses unequal quantities of long and short options at different strikes within the same expiration. The most common version is the 1×2 call ratio spread: buy one lower-strike call and sell two higher-strike calls. The premium collected from the two short calls partially or fully offsets the cost of the long call, often allowing entry for a net credit or near zero cost.

The strategy profits from limited, controlled stock movement. The ideal scenario is the stock drifting up to the short strike by expiration, where the long call has maximum value and the short calls expire worthless. The risk comes from the extra uncovered short contract. In a 1×2 call ratio spread, one short call is covered by the long call (forming a vertical spread), but the second short call is naked. If the stock rallies well past the short strike, that naked call generates open-ended losses.

Ratio spreads are popular in moderate implied volatility environments where a trader expects the stock to move toward a specific price target but not blow through it. They are also used when implied volatility is elevated and the trader expects it to contract, because the two short options benefit from a decline in IV. Risk management is critical with this strategy, and many traders place a hard stop or close the position well before the stock reaches the upper breakeven.

Worked Example

Ratio Spread Example Trade

XYZ is at $100. Buy 1 $100 call for $5.00, sell 2 $105 calls for $2.75 each. Net credit: $0.50. Strike width: $5.00.

Position Summary (1×2 Call Ratio Spread)
Stock Price$100.00
Long Call (buy 1)$100 strike — paid $5.00 (−$500)
Short Calls (sell 2)$105 strike — received $2.75 × 2 = +$550
Net Credit+$0.50 / share (+$50)
Strike Width$5.00 ($105 − $100)
Max Profit+$550 (stock at $105 at expiry: $500 + $50 credit)
Below $100 at ExpiryKeep $50 credit — no further loss
Upper Breakeven$110.50 ($105 + $5 + $0.50 credit)
Above Upper BreakevenUnlimited risk — losses increase $100 per $1 move
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FAQ

Ratio Spread — Common Questions

A ratio spread is an options strategy where you buy and sell different quantities of options at different strike prices within the same expiration. The most common version is the 1×2: buy one option at one strike and sell two at another. It can be constructed with calls (call ratio spread) or puts (put ratio spread). The unequal number of contracts creates a position that profits from limited movement toward the short strike but carries risk from the extra uncovered short option if the stock moves too far.
For a 1×2 call ratio spread, maximum profit occurs when the stock closes exactly at the short strike at expiration. The long call captures the full strike width while both short calls expire worthless. Max profit equals the strike width multiplied by 100, plus or minus the net credit or debit at entry. For example, buying 1 $100 call and selling 2 $105 calls for a $0.50 net credit gives max profit of ($5 × 100) + $50 = $550 per position.
A 1×2 call ratio spread has two risk zones. On the downside, risk is limited to the net debit paid (or zero if entered for a credit). On the upside, risk is theoretically unlimited because of the extra uncovered short call. Above the upper breakeven, losses increase dollar for dollar with each point the stock rises. This open-ended upside risk is why risk management is critical, and many traders set a stop-loss or close the position before the stock reaches the upper breakeven.
For a 1×2 call ratio spread entered for a credit, the upper breakeven equals the short strike plus the strike width plus the net credit per share. Using the example of buying 1 $100 call and selling 2 $105 calls for a $0.50 credit: upper breakeven = $105 + $5 + $0.50 = $110.50. If entered for a net debit, there is also a lower breakeven at the long strike plus the net debit. The stock must rise above the lower breakeven before the position starts to profit.
They are opposite strategies. In a ratio spread, you sell more contracts than you buy (e.g., buy 1, sell 2), creating extra short exposure and profiting from stability. In a backspread (ratio backspread), you buy more than you sell (e.g., sell 1, buy 2), creating extra long exposure and profiting from a large directional move. A ratio spread is a premium-selling, neutral strategy with unlimited risk on one side. A backspread is a premium-paying, directional strategy with limited risk and unlimited profit potential.