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The exact opposite trade of a Call Ratio Backspread: buy fewer calls than you sell, collecting a smaller net cost but leaving genuinely unlimited risk on a sharp rally.

Only two strikes, unlike the three-strike Christmas Tree — but the same underlying idea: an unequal number of contracts bought and sold leaves one side of the payoff uncapped.

A Call Front Ratio Spread buys a smaller number of calls at a lower strike and sells a larger number of calls at a higher strike — most commonly a 1:2 ratio, used throughout this page. Being net short more calls than you're long is what leaves the position with unlimited risk on a large rally — the opposite of a Call Ratio Backspread, which is net long and has unlimited profit potential instead of unlimited risk.

Counting contracts: +1 (bought) − 2 (sold) = net −1. Above the higher strike, this behaves increasingly like a naked Short Call, with the loss growing without bound the further the underlying rises.

Three zones, and they are not symmetric:

1. At or below the lower strike — a flat, capped loss. Both legs expire worthless, and you lose exactly the net debit paid.
2. Between the two strikes — profit grows as the underlying rises, peaking exactly at the higher strike.
3. Above the higher strike — profit shrinks, crosses into loss at the upper breakeven, and then keeps growing without any cap the further the underlying rises.

A Front Ratio Spread fits a view that's neutral to moderately bullish, with real conviction that a large rally is unlikely — the strategy's best outcome is the underlying landing exactly at the higher strike, not rallying well past it. It's cheaper to enter than a comparable defined-risk spread, since selling the extra call reduces the net cost, in exchange for accepting the open-ended risk on a big move.

Suppose Nifty is trading at 24,000 with a weekly expiry coming up, and lot size is 65. You expect a moderate rise, but not a sharp rally.

1. Confirm the setup, including the risk you're accepting. You expect Nifty near 24,300, but not much further, and accept unlimited risk if it rallies hard.
2. Buy 1 call at the 24,000 strike for a premium of 145.
3. Sell 2 calls at the 24,300 strike, collecting a premium of 60 each — 120 total.
4. Calculate the net debit: 145 − 120 = 25 points, or ₹1,625 at this lot size — your maximum loss only if Nifty stays flat or falls.
5. Understand the peak: exactly at 24,300, maximum profit of ₹17,875.
6. Understand the uncapped side: above 24,575, losses grow without limit as Nifty keeps rising.
7. See how it resolves at expiry:
   • Nifty finishes at or below 24,000 → capped loss of ₹1,625.
   • Nifty finishes exactly at 24,300 → maximum profit of ₹17,875.
   • Nifty finishes well above 24,575, say at 25,500 → a large, growing loss with no cap.

Quick reference for the same trade:

Based on the worked example above — the exact mirror image of the Call Ratio Backspread page's diagram. Move the cursor over the chart to see profit/loss at any price.

• The upside risk is genuinely unlimited — the single most important thing to understand before using this strategy. A large enough rally produces a loss with no ceiling.
• Margin requirements reflect that unlimited risk and will be substantial.
• The strategy specifically wants the underlying to land near the higher strike, not rally well past it — a strong "correct" bullish call can still be the worst outcome if it overshoots.
• Index options on NSE are typically European-style and cash-settled — no early-assignment risk on the short legs before expiry.