💡 Preface
This article shares the options strategy I’ve been using all along, plus some of my thoughts on risk control.
I built this strategy shortly after starting options trading and still use it today. It has gone through many adjustments and optimizations, but the core logic has never changed.
👉 This article is aimed at investors who already have some options background.
If you’ve just started, I suggest first understanding options’ basic concepts and principles. This post won’t cover complex Greek-letter calculations or pricing models — it’s more about strategy ideas and risk-control practice. (I can’t really compute those myself either 😂)
⚠️ Risk warning: No strategy works forever. Markets change, volatility changes, and people change too.
The content below is merely personal experience sharing and constitutes no investment advice.
🧩 The Ordinary Ratio Spread
Ratio Spread is a common options combination strategy.
Its core idea: by buying and selling options in different ratios, exploiting differences in volatility and time value to gain returns with controllable risk.
Take call options as an example 👇
- Buy a lower-strike call (Long Call) — gain upside opportunity;
- Sell a higher-strike call (Short Call) — collect premium to offset part of the cost.
The simplest example:
Buy 1 Call with a 10-yuan strike while selling 2 Calls with a 12-yuan strike.
You pay the bought premium while receiving the sold premium, forming a “ratio structure”.
🔗 Further reading
The strategy’s expiration profit/loss chart is below:
Personally I don’t much like this “mountain-peak” payoff curve.
Although intuitive, it feels insufficiently balanced and elegant. So I tried the variant below, which I prefer.
🚀 My Variant Strategy
🎬 Strategy Inspiration
I first saw this idea in PowerUpGammas’ video.
The video discusses “how to repair stock paper losses with options”, but I think it applies not only to loss repair — it can also amplify returns in trending markets.
Later he covered another video, Super Covered Calls — which is what this article describes.
🧱 Strategy Structure
- Hold a portion of the underlying asset (for covering);
- Buy 1 lower-strike call;
- Sell 2 higher-strike calls.
Compared with the ordinary ratio spread, the underlying asset itself is additionally included, acting as a risk buffer.
Understand it another way:
- “buy low + sell high” = Bull Call Spread
- “hold stock + sell high” = Covered Call
Combining the two forms this hybrid structure.
📈 Expiration Payoff Chart and Analysis
I drew an SPY illustration with OptionStrat:
👉 strategy chart link
The chart divides into three regions:
- Left red zone: stock price below 680 — all options expire worthless; P&L matches the underlying stock.
- Middle green zone (680–700): returns consist of stock appreciation + call option gains.
- Right flat-top zone (>700): the two sold Calls’ gains offset the upside — returns are capped.
💬 Key point:
The income from the two high-strike Calls must cover the low-strike Call’s cost; otherwise the strategy needs extra capital (rising risk).
I really like this payoff curve — smooth, linear, clean.
Mathematically it’s a piecewise linear function; logically it achieves a no-cost leverage boost in the middle segment.
✨ Advantages summary:
- Controllable risk, clear structure
- Achieves 2x returns within the range
- No extra capital occupation
🧭 Further Strategy Variants
Since the principle is “adjusting the return range with ratios”, we can play out more combinations.
🎯 Variant 1: Adjusting Range Width
Adjusting the buy/sell options’ strikes changes the return range.
For example:
- Buy 1 680 Call
- Sell 2 710 Calls
Widening the range → larger return scope, but the premium gap also grows — costs need rebalancing.
⚙️ Variant 2: Adjusting the Ratio
You can buy 2 and sell 3, achieving higher leverage (e.g. 3x returns).
As long as the sold premium covers the buying cost, the structure still holds.
🔄 Variant 3: Reverse Thinking (Put Version)
Similarly, a put version can be constructed:
buy 1 high-strike Put, sell 2 low-strike Puts, while preparing cash for “covering”.
🔄 Combining Variants
If we combine these variant strategies, the final payoff chart might look like this — in different ranges we can obtain different multiples of returns, also understood as applying different leverage multiples.
https://optionstrat.com/NpbByzGw1vll
I didn’t draw the put ratio spread, because this tool doesn’t offer me the option of covering with cash — but it’s actually similar to the call ratio spread, just in the opposite direction.
⚖️ Risks and Trade-offs
This structure’s advantage: wrong views don’t lose, right views win big.
But note the following risks 👇
- Underlying downside risk: if the price falls below the low strike, losses match holding the stock.
- Opportunity cost: capital is locked in the underlying; returns are limited when it trades sideways.
- Missing-the-rally risk: if the underlying surges, returns are capped — plan ahead.
🧮 Market Analysis and Quantitative Exploration
Since the structure is clear, I naturally wanted to see how much leverage the STAR 50 ETF options I usually trade can achieve.
I wrote a small program that, based on STAR 50 ETF options data, computes each contract’s achievable maximum leverage multiple (no extra investment).
For example:
- Among March ‘26 STAR 50 ETF option contracts:
the 1.55 Call costs 1213
the 1.6 Call costs 1063
→ theoretically 8x leverage is possible (sell 8, buy 7)
1 | 8 * 1063 - 7 * 1213 = +13 # (excluding fees) |
I wrote a scheduled task to automatically compute and plot the achievable leverage multiple within each range segment. Below are leverage computation charts for two different months’ contracts: the x-axis is different time points, the y-axis is the leverage multiple.
📉 Near-month contracts (2–3x leverage):
📈 Far-month contracts (6–8x leverage):
Readers can compute it themselves: the leverage multiple is inversely proportional to the spread and directly proportional to the contract prices. The smaller the two options’ spread and the higher the prices, the greater the achievable leverage.
📊 My Holdings Tracking and Management
I use Google Sheets to manage holdings and leverage situations 👇
And mark each range segment’s and month’s leverage multiple:
These data help me dynamically adjust positions and optimize structure.
📍 Opening positions is easy; management matters more. Many options contracts needn’t be held to expiration — how to adjust mid-way may be more important.
A little reflection after several months of options: as long as you can stay alive in the market, you have chances to make money. This strategy can keep you alive in the market for a long time. If I’m ever unemployed, I can use this strategy to work for the market and earn some pocket money.
🧩 Summary
This ratio-spread variant is one of the most core and most-used strategies in my actual trading.
It’s especially suitable for clear one-way trending markets or large oscillating markets.
For larger investors, this structure is more like micro market making:
providing market liquidity and earning structural premiums.
Of course, that requires a more mature risk matrix and capital-tiering system.
🤔 Why Am I Not Worried the Strategy Will Fail Once Public?
- Markets need liquidity: more users → more efficient prices.
- Institutions are more complex: their models are theoretically more sophisticated — I simply needn’t worry about them.
- Limited returns: capped profit doesn’t attract extreme speculators.