--- title: "Ratio spreads, backspreads, jade lizard and broken wing" description: "A ratio spread buys one option and sells more options of the same type at a further strike." source_url: "https://www.rupeecase.com/learn/questions/ratio-spreads-and-backspreads" --- A one by two call ratio spread gains most at its upper strike and loses more the further the index rises beyond it Profit and loss at expiry for one long call and two short calls at the higher strike on the 30 Jun 2026 Nifty chain, priced at the settle prices of 10 Jun 2026. Rupees for the whole position, before costs. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. A ratio spread is a vertical spread with an extra short leg. The chart uses a 1 by 2 call ratio on the 30 Jun 2026 expiry: one long call at the nearer strike and two short calls at the higher strike. The chart shows the payoff at expiry on the 10 Jun 2026 chain. The gain is largest at the upper strike. Above that strike the position is short one call net, so the loss keeps growing for every move the index makes above it. Below the lower strike the position is only the premium paid or received. A backspread reverses the ratio. It sells the nearer option and buys two further out. It loses in a band around the strikes and gains if the index moves far in the direction of the bought options. The cost is the band where it loses, and the time the position spends inside it. A jade lizard is a short put placed with a short call spread, and a broken wing butterfly is a butterfly with one wing set further out. Both change the shape of the loss. Each variant gives up part of the payoff for another part, so the payoff diagram is the most direct way to read what has been traded. Ratio positions carry more risk than the spreads they grow from, because the open loss sits on the short side. The loss at a large move is the first number to read from the chart. The expiry day page covers how settlement fixes the final payoff, and the margin page covers what the short side ties up. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) Ratio spreads, backspreads, jade lizard and broken wing butterfly: what are they?A ratio spread buys one option and sells more options of the same type at a further strike, so it has a band of profit near the sold strike and an open ended loss beyond it. A backspread is the reverse: it sells one option and buys more further out, so it loses in the middle and gains if the index moves far in the direction of the bought options. LGo deeper ## Where Learn teaches this. [Go deeperRatio spreads and backspreads10 min, Advanced](/learn/path-17/module-17-16-ratio-spreads-and-backspreads)[Go deeperButterflies and broken wing butterflies9 min, Intermediate](/learn/path-17/module-17-8-butterflies) SSources ## Go to the source. 2 sources, NISM the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [NISM, Series VIII equity derivatives certification test objectives](https://www.nism.ac.in/revamp-nism/test-objectives-revised-nism-series-viii-equity-derivatives-certification-examination/) NISM 2. [NSE, equity derivatives contract specifications: lots, expiries and settlement](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE ?Questions people ask ## Related questions. 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