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+Chapter 11: Ratio Call Spreads 211 
+The maximum profit at expiration for a ratio spread occurs if the stock is exact­
+ly at the striking price of the written options. This is true for nearly all types of strate­
+gies involving written options. In the example, if XYZ were at 45 at April expiration, 
+the April 45 calls would expire worthless for a gain of $600 on the two of them, and 
+the April 40 call would be worth 5 points, resulting in no gain or loss on that call. 
+Thus, the total profit would be $600 less commissions. 
+The greatest risk in a ratio call spread lies to the upside, where the loss may the­
+oretically be unlimited. The upside break-even point in this example is 51, as shown 
+in Table 11-1. The table and Figure 11-1 illustrate the statements made in the pre­
+ceding paragraphs. 
+In a 2:1 ratio spread, two calls are sold for each one purchased. The maximum 
+profit amount and the upside break-even point can easily be computed by using the 
+following formulae: 
+Points of maximum profit = Initial credit + Difference between strikes or 
+= Difference between strikes - Initial debit 
+Upside break-even point= Higher strike price+ Points of maximum profit 
+In the preceding example, the initial credit was 1 point, so the points of maxi­
+mum profit = 1 + 5 = 6, or $600. The upside break-even point is then 45 + 6, or 51. 
+This agrees with the results determined earlier. Note that if the spread is established 
+at a debit rather than a credit, the debit is subtracted from the striking price differ­
+ential to determine the points of maximum profit. 
+Many neutral investors prefer ratio spreads over ratio writes for two reasons: 
+TABLE 11-1. 
+Ratio call spread. 
+XYZ Price of April 40 Coll April 45 Coll Total 
+Expiration Profits Profits Profits 
+35 -$ 500 +$ 600 +$100 
+40 - 500 + 600 + 100 
+42 - 300 + 600 + 300 
+45 0 + 600 + 600 
+48 + 300 0 + 300 
+51 + 600 - 600 0 
+55 +1,000 -1,400 - 400 
+60 + 1,500 -2,400 - 900