Ratio Spreads and the Batman Strategy, Built in the Option Wizard
A ratio spread buys options at one strike and sells more options at another strike of the same type and expiry, for example buy 1 ATM put and sell 3 puts further out of the money. Put a call ratio spread and a put ratio spread together and the payoff has two peaks, which is why traders call it the Batman strategy. Here is how it works and how to build it with Tradetron's Option Wizard.
From spread to ratio spread
Start with an ordinary bear put spread. With NIFTY at 21,500, buy the 21,500 put (ATM) and sell the 21,100 put (out of the money). You pay a net premium, and your loss and profit are both capped.
Now change only the quantity: sell 2 or 3 of the 21,100 puts for every one you buy. That is a put ratio spread. The extra short puts bring in more premium, often enough to make the whole trade a net credit, but the puts you sold beyond the first are no longer covered by a long put.
A call ratio spread: the peak sits at the short strike; beyond the breakeven, the extra short options lose
| Plain spread (1×1) | Ratio spread (1×2 or 1×3) | |
|---|---|---|
| Net premium | Usually a debit | Often a credit |
| Best outcome | Big move in your direction | Index settles near the short strike |
| Risk beyond the short strike | Capped | Unlimited on the extra short options |
| Margin | Low (hedged) | Higher (naked short options) |
The Batman: two ratio spreads at once
Combine a call ratio spread and a put ratio spread, both centred on the ATM strike, and you get a non-directional position with two profit peaks, one at each short strike, and a dip between them. On a payoff chart it looks like a bat's ears.
Hypothetical premiums, one lot of 65. Shaded areas are losses.
This is an expiry payoff. The intraday version below exits the same day, long before expiry, so actual P&L follows the same shape but smoothed out by the time value left in the options.
The rules
Why wait until 10:00 AM? The first 45 minutes carry the overnight gap and the fastest moves of the day. A position that profits most when the index stays near its level is better opened after that early volatility has settled.
Building it with the Option Wizard
The Option Wizard sets up a multi-leg options strategy without writing conditions by hand:
- Create a strategy from Create → Option Wizard → Create Own Strategy, and name it (for example, "Ratio").
- Choose the underlying and type: NIFTY 50, Intraday, and the capital you want to allocate.
- Add the legs: Buy ATM CE (1 lot), Buy ATM PE (1 lot), Sell OTM 3 CE (3 lots), Sell OTM 3 PE (3 lots), all on the current weekly expiry.
- Set the entry time to 10:00 and add a trailing stop loss.
- Backtest before deploying.
The four legs of the Batman in the Option Wizard
What to look for in the backtest
When you run the backtest, look beyond the final P&L:
- Maximum drawdown and recovery time. How deep did the worst losing stretch go, and how many days did it take to get back to the previous high?
- Day-of-week results. If one weekday is consistently weak, test the strategy with that day excluded, then check the result holds in a different year before you keep the change.
- Trades per month. With four legs per trade, costs add up. Make sure the backtest's profit survives brokerage, taxes and slippage.
- The return histogram. A strategy that wins small most days but has a few very large losing days needs a tighter strategy-level stop.
Pros
- Non-directional: profits in a range around the current level
- Often entered for a net credit
- Simple to build in the Option Wizard
- Two profit peaks give a wider sweet spot than a single short strike
Cons
- Unlimited loss on large moves in either direction
- High margin because of the naked short options
- Four legs per trade means higher costs
- Needs a disciplined stop to survive trending days
Related: the butterfly strategy in options, the iron condor guide, and hybrid option spread strategies.
Frequently asked questions
What is a ratio spread in options?
A ratio spread buys options at one strike and sells a larger number of options of the same type and expiry at another strike, for example buy 1 call and sell 2 or 3 higher-strike calls. It often collects a net credit but leaves the extra short options uncovered.
What is the Batman strategy?
It combines a call ratio spread and a put ratio spread around the ATM strike. The payoff has two profit peaks at the short strikes, which looks like a bat's ears on a chart. It suits a market expected to stay within a range.
Is a ratio spread risky?
Yes. Beyond the breakeven point, the extra short options lose money without limit. That is why ratio spreads need a stop loss and more margin than a hedged spread.
What is the difference between a ratio spread and a butterfly?
A butterfly buys back protection beyond the short strikes, so its loss is capped. A ratio spread doesn't, so it collects more premium but has unlimited risk on big moves.
How do I build a ratio spread on Tradetron?
Use the Option Wizard: choose the underlying, add the buy legs at one strike and the sell legs with a larger lot count at another strike, set the entry time and a trailing stop, then backtest and run it Live Offline.
