Moderately directional with target price expectation
| Strategy Type | Ratio Spread / Unequal Quantity Strategy |
| Market Outlook | Moderately directional with target price expectation |
| Risk Profile | Asymmetric - Limited one side, Unlimited other side |
| Reward Profile | Maximum profit at short strike, can be entered for credit |
| Time Horizon | Short to Medium-term (21-45 DTE typical) |
| Iv Environment | High IV preferred (selling extra options benefits from premium) |
| Breakeven | Complex - depends on ratio and credit/debit |
| Primary Instruments | FTSE 100 Index options, UK large cap stock options, US-listed UK ADR options |
| Mas Compliance | MAS regulated brokers required; Level 4 options approval typically needed for naked exposure |
| Trading Hours | FTSE options: London hours 4 PM - 12:30 AM SGT; US ADRs: US hours |
| Contract Size | FTSE 100 options: £10 per point; Stock options: 100 shares typically |
| Settlement | FTSE options: Cash settled (reduces assignment risk); Stock options: Physical delivery |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Higher margin due to naked option component; varies by broker |
| Cdp Account | Not required for foreign options; custody with broker |
| Singapore Relevance | Ratio spreads offer enhanced income potential for experienced traders comfortable with asymmetric risk profiles |
Buy 1 option, sell 2+ options at different strikes. Creates asymmetric risk: Limited one side, unlimited other. Example: Buy 1 ATM call, Sell 2 OTM calls = Call ratio spread.
Enhanced income (selling extra options), often enter for credit, max profit at target price. Use when moderately directional view and comfortable with naked exposure.
UNLIMITED risk on one side. Call ratio: Unlimited above upper breakeven. Put ratio: Unlimited below lower breakeven. The naked option creates uncovered exposure.
At the short strike. Long option is profitable, shorts expire worthless. Example: 7,500/7,600 call ratio, max profit when FTSE at exactly 7,600 at expiration.
Beyond breakeven on the naked side. Losses accelerate in this zone. Must have exit plan before entering danger zone.
Opposite of ratio - sell 1, buy 2+. Limited risk between strikes, unlimited profit potential in direction of extra longs. Use for very bullish/bearish views.
1:2: Standard, 1 naked option. 1:3: More credit, 2 naked options, closer breakeven. 2:3: Conservative, 1 naked option. Match to conviction and risk tolerance.
Options: Buy wing (converts to defined risk), roll shorts further OTM, reduce ratio (buy back one short), close position. Decision based on cost vs benefit.
High IV (>40% rank). Extra shorts generate more premium. Better credit, wider breakeven. Also benefits from IV crush after entry.
50% of max profit (target), 7 DTE (time exit), price approaching danger zone, delta exceeding 0.50. Don't hold hoping - manage actively.
Analyze skew at potential short strikes. Higher IV at short = Better premium. Compare across strikes and expirations. Enter when surface offers edge vs theoretical.
Ratio across expirations - long back-month, short multiple front-month. Combines time decay differential with ratio income enhancement. Complex but powerful.
Cap total naked exposure (10-15%), daily loss limits, stress test for gaps. Combine with defined risk strategies. Track aggregate Greeks. Size for tail events.
Hardest to manage. Overnight gap through breakeven = Significant loss. Mitigate: Smaller size, permanent wings, diversification, strict position limits. Accept as cost of strategy.
10-20% allocation for enhanced income. Balance with 50-60% defined risk. Ratios add return potential but tail risk. Monitor aggregate exposure. Adjust based on risk tolerance.
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