Variable Ratio Write

Variable Ratio Write

An option strategy in which the investor owns 100 shares of the underlying security and writes two call options against it, each option having a different striking price.

---

Variable Ratio Write

An options investment strategy in which the owner of an underlying security writes a number of calls at different strike prices on that security. Generally, only one of those options is exercised (if any are at all), leaving the owner with only the profit of the option premiums. Variable ratio writes thus have limited profit potential, but carry the possibility that an option will be exercised at a price favorable to the writer.

The phrase "variable ratio" in the term comes from the fact that the writer may write a theoretically unlimited number of options per 100 shares of the underlying security actually owned. Often, the owner writes two options per 100 shares, giving a 2:1 ratio.