Chapter 34: Futures and Futures Options 
FIGURE 34-2. 
January soybean, ratio spread. 
90 
80 
70 
60 
50 
:!:: 
40 0 ... a.. 30 
0 20 .le 
C 10 
~ 0 
-10 
-20 
-30 
575 625 650 
At Expiration 
Futures Price 
Points of maximum profit = Maximum downside loss 
+ Difference in strikes 
x Number of calls owned 
=-4½ + 50 X 2 
=95½ 
Upside break-even price = Higher striking price 
700 
+ Maximum profit/Net number of naked calls 
= 650 + 95½/3 
= 681.8 
689 
These are the significant points of profitability at expiration. One does not care 
what the unit of trading is (for example, cents for soybeans) or how many dollars are 
involved in one unit of trading ($50 for soybeans and soybean options). He can con­
duct his analysis strictly in terms of points, and he should do so. 
Before proceeding into the comparisons beleen the backspread and the ratio 
spread as they apply to mispriced futures options, it should be pointed out that the seri­
ous strategist should analyze how his position will perform over the short term as well 
as at expiration. These analyses are presented in Chapter 36 on advanced concepts.