954 Appendix C 
Ratio Spread 
-Calls (Ch. 11): buy n1 calls at lower strike, s1, and sell n2 calls at higher 
strike, s2 
s1 < s2 
n1 < n2 
R = n1c1 - n2c2 
P = (s2 - s1)n1 -R 
p 
U=s 2 +--­n2-n1 
Break-even cost oflong calls for follow-up action (Ch. 11) 
Break-even cost = n2(s2 - si) - R 
n2-n1 
-Puts (Ch. 24): buy n2 puts at higher strike, s2, and sell n1 puts at lower 
strike, s1 
S1 < S2 
n2 < n1 
R = n2p2 - n1p1 
P = n2(s2 - s1) - R 
p D =S1----
n1 -n2 
Reversed-See Conversion and Reversal Profit 
Reverse Hedge (Ch. 4)-simulated straddle purchase 
General case: short m round lots of stock and long n calls 
R = m(s -x) + nc 
U=s+-R-n-m 
R D=s--m 
X 
s 
C 
current stock price 
striking price 
call price 
p put price 
r interest rate 
t = time (in years) 
B 
u 
D 
p 
R 
break-even point 
upside break-even point 
downside break-even point 
maximum profit potential 
maximum risk potential 
Subscripts indicate multiple items. For example s1, s2, s3 would designate three striking prices in a formula. 
The formulae are arranged alphabetically by title or by strategy.