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+212 Part II: Call Option Strategies 
+FIGURE 11 • 1. 
+Ratio call spread (2: 1 ). 
+Stock Price at Expiration 
+1. The downside risk or gain is predetermined in the ratio spread at expiration, and 
+therefore the position does not require much monitoring on the downside. 
+2. The margin investment required for a ratio spread is normally smaller than that 
+required for a ratio write, since on the long side one is buying a call rather than 
+buying the common stock itself. 
+For margin purposes, a ratio spread is really the combination of a bull spread 
+and a naked call write. There is no margin requirement for a bull spread other than 
+the net debit to establish the bull spread. The net investment for the ratio spread is 
+thus equal to the collateral required for the naked calls in the spread plus or minus 
+the net debit or credit of the spread. In the example above, there is one naked call. 
+The requirement for the naked call is 20% of the stock price plus the call premium, 
+less the out-of-the-money amount. So the requirement in the example would be 20% 
+of 44, or $880, plus the call premium of $300, less the one point that the stock is 
+below the striking price - a $1,080 requirement for the naked call. Since the spread 
+was established at a credit of one point, this credit can also be applied against the ini­
+tial requirement, thereby reducing that requirement to $980. Since there is a naked 
+call in this spread, there will be a mark to market if the stock moves up. Just as was 
+recommended for the ratio write, it is recommended that the ratio spreader allow at 
+least enough collateral to reach the upside break-even point. Since the upside break­
+even point is 51 in this example, the spreader should allow 20% of 51, or $1,020, plus