Like the title says…what are the conditions in which one should consider far OTM ratio spread?
Please don’t tell me to read varsity…
I am specifically asking about nifty/bank nifty. @Sensibull @maddy_Des @ksksat @nithin @siva @Bhuvan
When there is ample time to expiry. AND
When you expect very big move
Ratio spreads are used like below
Tcs spot 2100
2:1 call ratio means sell call 1 lot of tcs at 2000 and buy 1 lot call at 2400 and another at 2600
Idea is to collect a hefty premium as u r bearish on tcs to close below 2000. But out of that fat premium collected u spend some amount to buy a insurance by buying far otms calls just in case there is voiolent move on other side ie here upside big move
Thanks …I meant to ask in what assumption/view/situation you should consider far OTM ratio spread ?
When you believe that the price will respect resistance, failing which there’s going to be a strong breakout, needless to say- unlimited loss
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