Call Ratio Spread

Usage: Volatility is high and the user expects TXN to stay neutral but wants reduced risk if TXN turns bearish. The user wants a wider neutral profit region than a long butterfly and is willing to accept upside market risk to achieve the wider profit region.

Profits: Maximum profit occurs if TXN is at 105 at expiration ($1400). The break-even points for the example are 91 and 119.

Losses: Open ended if TXN rises. Losses on the downside are limited to ~$700 in the graph.

Result: TXN closes at 110 13/16 on 01/21/00. At expiration, the trade has a profit of $807.

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Quoted profitModel profitQuoted PriceModel price Delta
(Shares)		GammaVegaTheta
$ -25.00 $ -22.98 5 7/8 5 7/8 -24.8 -3.4479 $-23.02 $ 14.01

Statistical Volatility Estimate For Probability Calcs: %

Days From TodayProb of ProfitExpected ProfitOdds of Success
14 63.6% $-57.99 0.7 to 1
28 61.5% $-90.84 0.7 to 1
Expiration 53.5% $-124.30 0.8 to 1

Green is current market conditions
X TXN @
Quote = 23 1/4, Model = 23, Delta = 92, IV = 55.1%, IV_EST = 50.8%, Volume = 432, OI = 8740
Bid = 23 1/8, Ask = 23 3/8,
TXN @
Quote = 8 11/16, Model = 8 9/16, Delta = -117, IV = 51.7%, IV_EST = 50.8%, Volume = 413, OI = 1730
Bid = 8 5/8, Ask = 8 3/4,