The Ratio Calendar Call is a bullish option strategy with the possibility of profiting in two different expiration months.


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Strategy: Ratio Calendar Call

Ratio Calendar Call Option Graph

The Outlook: Neutral to bullish on stock price movement, and Implied Volatility currently low or normal. The expectation is that gains will be made if the stock does nothing, or rises, or IV increases.

The Trade: Sell call(s) using the strike price nearest the current stock price, and a near term expiration date, and buy two call(s) for each call sold, using the same strike price and an expiration date further out in time.

Gains when: Stock price stays near current stock price, or rises.

Maximum Gain: Unlimited

Loses when: Stock goes below the breakeven point, or before expiration if volatility falls too much.

Maximum Loss : Limited to the initial debit.

Breakeven Calculation: An options calculator or graphing software is necessary to calculate because the breakeven depends on the volatility.

Advantages compared to stock: Ability to profit from no stock movement as well as a rise in price, much less capital required, "built-in" stop loss.

Disadvantages compared to stock: Greater risk of 100% loss of the capital invested, no dividends, limited life.

Volatility: after entry, increasing implied volatility is positive.

Time: after entry, the passage of time is positive near the short strike price, negative at prices higher or lower.

Margin Requirement : None. Initial debit must be paid in full.

Variations: See the Ratio Calendar Put if neutral to bearish.


  • If you were purely bullish, just buying a Long Call would be less expensive than this position. However, when using a Long Call the stock must rise enough to overcome the initial debit before the position shows a gain. The Ratio Calendar Call can gain with no stock movement.
  • Implied Volatility can have a big effect on this position. If the IV is high when you enter this strategy and then drops, the position will likely be under water until expiration, unless there is a good move higher in the stock price. It is much better to enter when the IV is low. That will give an opportunity to take gains early if the IV rises.
  • This strategy has a psychologically difficult feature, which is that the position will look like a loser right up until expiration day if the stock price stays near the short strike. This is because the strategy has two long calls losing some time value every day the stock does nothing, and one short call that will not lose its entire value until it expires.
  • You might use this strategy if you wanted to be bullishly positioned for an earnings month, but the month before the earnings report you did not expect the stock to move. By selling the short call, you can make some premium to help pay for the two long calls, and possibly profit in two different months.
  • Other variations of Calendar Calls can be used if you have a near-term more neutral or bullish or bearish opinion on a stock or ETF, and want to target a "sweet spot" at the current price, or higher or lower than the current price. See Calendar Call, ATM for a neutral strategy, Calendar Call, OTM for a bullish strategy, and Calendar Call, ITM for a bearish strategy.
  • other ratios can be used if you are more or less bullish. You could buy 3 long calls for every 1 short, or 3 long and 2 short, etc.


  • Since this is a neutral to bullish position, the trader is expecting the stock to hold steady or rise. If the stock falls, it is usually wise to exit the trade, taking less than the maximum possible loss. Using the graph at the top of the page, you might exit with a loss of about $75 if the stock fell to about 49, and your loss would be about one-fifth the maximum possible loss, which is the entire debit of $384.
  • If the reason for entry of the trade was to gain from the stock going nowhere in the near term, but hold long calls in case of a bullish move in the long term, then the trader would attempt to hold the position until expiration, assuming the short calls have a chance of expiring worthless. Then the long calls can be held with the expectation of a bullish move, like any other long call position. Even though you collected premium from the short calls, you should not expect to have any sort of a "bargain" on your long calls, because time has passed since you bought them, and the stock has not moved yet.


  • A trader can think of this position as a regular ATM Calendar Call plus a Long Call. By checking an option graph of the regular Calendar Call, the trader can make note of where he might use a stop loss if the stock rises. If the stock does rise to that level, the Calendar Call can be closed out to avoid further damage, while still holding a Long Call for further gains.

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