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+Chapter 37: How Volatility Affects Popular Strategies 781 
+call bull spreads and some naked call options. For example, a call ratio spread might 
+consist of buying an XYZ July 100 call and selling two XYZ July 120 calls. If one were 
+to break it down into its components, this spread is really long one XYZ July 100-120 
+call bull spread, plus an additional naked July 120 call. 
+We already know that an increase in implied volatility is very detrimental to a 
+naked call option. In addition, it was shown earlier than an increase in implied volatil­
+ity actually harms the value of an at-the-money call bull spread. So, for a ratio call 
+spread, both components are harmed by an increase in implied volatility. Conversely, 
+a decrease in implied volatility would be beneficial to a ratio spread, but where naked 
+options are concerned, one should be more mindful of his risk than of this reward. 
+It was also shown previously that a call bull spread does not widen out much if 
+the underlying stock makes a quick upward move. The spread won't widen out to its 
+maximum profit potential until expiration draws nigh or the stock is well above the 
+upper strike in the spread. This scenario also does not bode well for the ratio call 
+spread. Suppose that the underlying stock suddenly jumps upward and implied 
+volatility increases at the same time. That combination is seen quite frequently, espe­
+cially if the stock were previously "dull" or if there is some sort of active corporate 
+(takeover) rumor. The call ratio spread will fare miserably under these conditions, 
+because the increase in stock price certainly harms the naked call position and the 
+bull spread is not widening out much to compensate for it. In addition, the increase 
+in implied volatility is working against both components. 
+The same sort of thing happens with put ratio spreads. They are really the com­
+bination of a put bear spread plus some additional naked put options. If the under­
+lying falls in price, while implied volatility increases - a very common occurrence in 
+all markets then the put ratio spread will fare poorly. In fact, implied volatility 
+sometimes explodes if the underlying falls very rapidly (crashes), so the ratio put 
+spreader should clearly assess his risk in this light. 
+In summary, a trader utilizing ratio spread strategies should clearly understand 
+and attempt to analyze the risks of an increase in implied volatility. This includes not 
+only assessing the vega risk of the spread, but also using a probability calculator with 
+some inflated volatility estimates to see just what the chances are of the spread get­
+ting into real trouble. 
+BACKSPREADS 
+A call backspread is merely the opposite of a call ratio spread. Thus, any of the earli­
+er commentary about how an increase in implied volatility is detrimental to a ratio 
+spread can be reversed when discussing the backspread. An increase in implied 
+volatility will be beneficial to a backspread strategy, while a decrease in implied