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A three-strike, all-call strategy with a defined loss on one side and genuinely unlimited risk on the other — a real, important distinction from the butterflies and condors elsewhere on this site, which are always risk-defined on both sides.

Read the "How does it work" section below carefully before using this strategy — the unlimited-risk side is easy to overlook if you're expecting the same defined-risk shape a butterfly has.

A Call Christmas Tree buys one call at a low strike and sells one call each at two higher strikes — three strikes total, but an uneven number of contracts: one bought, two sold. This is the key structural difference from a butterfly, which always buys and sells the same total number of contracts. That imbalance is what gives this strategy its distinctive risk shape.

Counting contracts: +1 (bought) − 1 − 1 (sold) = net −1. You end up net short one call overall, which is exactly why the risk above the highest strike behaves like a naked Short Call's — genuinely unlimited, not capped by a protective long leg the way a proper butterfly's wings would cap it.

This is the most important section on this page. The payoff moves through four distinct zones, and they are not symmetric:

1. At or below the low strike — maximum loss on this side, but fully capped and flat. This is a genuine defined-risk zone.
2. Between the low and mid strikes — loss shrinks as the underlying rises, crossing into profit at the lower breakeven.
3. Between the mid and high strikes (the profit plateau) — maximum profit, flat across the zone.
4. Above the high strike — profit shrinks, crosses into loss at the upper breakeven, and then keeps growing without any cap the further the underlying rises. There is no ceiling on this side.

Compare this directly to a Long Call Condor, which looks similar at first glance (also buys a low strike and profits from a middle plateau) but adds a fourth leg — a long call at the highest strike — specifically to cap the loss that this Christmas Tree structure leaves open.

A Christmas Tree fits a neutral-to-moderately-bullish view where a trader is comfortable accepting unlimited risk on a large rally, in exchange for a cheaper entry than a fully defined-risk structure like a Long Call Condor (which needs a fourth leg's premium to cap that same risk). Given the open-ended exposure, it's generally used with real conviction that a large rally is unlikely, active risk management, or a plan to adjust the position if the underlying approaches the high strike.

Suppose Nifty is trading at 24,000 with a weekly expiry coming up, and lot size is 65. You expect it to settle between 24,000 and 24,300, and accept the risk of a bigger rally.

1. Confirm the setup, including the risk you're accepting. You expect Nifty near 24,000–24,300, and are comfortable with unlimited risk if it rallies much further.
2. Buy 1 call at the 23,700 strike for a premium of 325.
3. Sell 1 call at the 24,000 strike, collecting a premium of 145.
4. Sell 1 call at the 24,300 strike, collecting a premium of 60.
5. Calculate the net debit: 325 − 145 − 60 = 120 points, or ₹7,800 at this lot size — your maximum loss only on the downside.
6. Understand the plateau: between 24,000 and 24,300, maximum profit of ₹11,700.
7. Understand the uncapped side: above 24,480, losses grow without limit as Nifty keeps rising — there is no maximum loss figure on this side.
8. See how it resolves at expiry:
   • Nifty finishes at or below 23,700 → capped loss of ₹7,800.
   • Nifty finishes between 24,000 and 24,300 → maximum profit of ₹11,700.
   • Nifty finishes well above 24,480, say at 26,000 → a large, growing loss with no cap.

Quick reference for the same trade:

Based on the worked example above. Notice the line flattens on the left (capped loss) but keeps sloping downward on the right with no floor — that asymmetry is the defining feature of this strategy. Move the cursor over the chart to see profit/loss at any price.

• The upside risk is genuinely unlimited — this bears repeating, since it's the single most important thing to understand before using this strategy. A large enough rally produces a loss with no ceiling, the same as a naked Short Call.
• Margin requirements reflect that unlimited risk and will be substantial, unlike a fully defined-risk structure such as a Long Call Condor.
• Three separate legs mean higher execution cost than a two-leg spread.
• Index options on NSE are typically European-style and cash-settled — no early-assignment risk on the short legs before expiry, though the underlying unlimited risk on the position itself remains regardless.