Outlook: Skewed conviction. Taught in full in Lesson 25, Calendars, diagonals & the advanced shelf. This page is the reference card.
Illustration, not a recommendation. The strikes and premiums on this page are fixed teaching figures, not live quotes, and no strategy suits every account or every market. Read the full disclaimer.
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What you must believe
Backspread: if it moves, it moves huge (and you accept a sag if it merely drifts). Ratio spread: the mirror bet, collecting extra premium while hiding a naked tail.
Construction
Call backspread: sell one 25,000 CE at ₹120, buy two 25,200 CEs at ₹55 each. Net credit ₹10 per unit (₹650 per lot).
The numbers, before entry
Below 25,000: keep the ₹650 credit; a full crash costs nothing
The sag: −₹12,350 at exactly 25,200, the structure's worst point
The payoff: +₹13,650 at 25,600 and climbing without limit
Upper breakeven: 25,390; margin: the short leg prices near naked until the longs cover it
Greeks profile
Long gamma and vega in the wings, short theta in the middle: the sag zone pays rent daily while you wait for the explosion. The ratio spread reverses every sign, including the unlimited tail.
Realistic expectations
Backspreads are convexity purchases disguised as credit trades: most weeks end at small-plus or in the sag, and the occasional monster move pays for the campaign. Ratio spreads collect more often and carry the naked tail that ends campaigns. Sized small, the backspread is a legitimate lottery ticket with the odds printed honestly.
Management rules
Size by the sag, not the credit: −₹12,350 is the real ticket price
Exit the drift early; the sag deepens into expiry as the longs die
Bolted under a short strangle's feared side, the backspread caps a tail for roughly nothing: the self-built half-condor
It is the long straddle's credit-financed cousin: similar explosion thesis, paid for with a sag instead of a premium bill; IV rank picks between them
Pre-breakout charts pair with it naturally: a coiling range plus a backspread is "paid to wait for the break" with the tail already owned
The ratio spread quietly lives inside many "adjusted" positions: rolling a threatened credit spread by selling extra contracts builds one, usually unintentionally. Name it when you see it
Common mistakes
Reading the credit as safety while standing in the sag at expiry
Building ratio spreads for income without pricing the naked tail
Oversizing because the entry was "free"; the sag is the price tag