-The Call Ratio is nothing more than a Bull Call with an extra Short Call usually at the strike price of the Short Call in the Bull Call.  Example:  BTO one Long Call at 25 and STO two Calls at 30.  The maximum reward is achieved if the stock settles at the short call strike.  The trade can be place at a debit or a credit.  If the stock settles between the long and short strikes, the profit is reduced and the break even is the Long Call strike plus the debit (if placed for a debit).  If place for a credit, the trade will make a small profit wherever it settles below the upside breakeven.

The upside profit begins to diminish the further the stock rises above the Short Call strike.  The Short Calls will cost more to close as the stock rises which is detrimental to the seller of the calls, so even though the 25 Long Call is increasing in value, the Short Calls are losing faster that the Long Call is gaining.  At expiration, when the Stock rises beyond the amount of the Short Call premium collected, the position begins to lose.  Because there is one call uncovered, the trader must post margin on the trade.

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