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+232 Part II: Call Option Strategies 
+Figure 13-1 • 
+Calendar spread sale at near-term expiration. 
+$400 
+$300 
+Implied Volatility 
+Lower 
+$200 \ 
+f/) 
+$100 f/) 
+0 
+~ 
+$0 50 60 110 120 
+a. -$100 
+-$200 
+-$300 
+Implied Volatility 
+-$400 Remains High 
+-$500 
+Underlying Price 
+allowed to stand because none of the member firms cared about changing it. Still, if 
+one has excess collateral - perhaps from a large stock portfolio - and is interested in 
+generating excess income in a hedged manner, then the strategy might be applicable 
+for him as well. Futures option traders receive more favorable margin requirements, 
+and it thus might be a more economical strategy for them. 
+REVERSE RATIO SPREAD (BACKSPREAD) 
+A more popular reverse strategy is the reverse ratio call spread, which is comrrwnly 
+known as a backspread. In this type of spread, one would sell a call at one striking 
+price and then would buy several calls at a higher striking price. This is exactly the 
+opposite of the ratio spread described in Chapter 11. Some traders refer to any 
+spread with unlimited profit potential on at least one side as a backspread. Thus, in 
+most backspreading strategies, the spreader wants the stock to rrwve dramatically. He 
+does not generally care whether it moves up or down. Recall that in the reverse 
+hedge strategy (similar to a straddle buy) described in Chapter 4, the strategist had 
+the potential for large profits if the stock moved either up or down by a great deal. 
+In the backspread strategy discussed here, large potential profits exist if the stock 
+moves up dramatically, but there is limited profit potential to the downside. 
+Example: XYZ is selling for 43 and the July 40 call is at 4, with the July 45 call at l. 
+A reverse ratio spread would be established as follows: ·