ZEBRA (zero extrinsic back ratio)
Two in-the-money calls against one at the money: the time value nets to about zero, so it behaves like stock.
Bullish2 legsDebit
Illustrative: underlying at 100, strikes every 2.5, 45 days to expiry, implied volatility 25%, model prices. One lot = 100 shares.
Key figures
| Opens for | a debit of $658 |
|---|---|
| Max profit | Open-ended as the price rises |
| Max loss | −$658 |
| Break-even | 101.58 |
| Position delta today | +76 shares |
| Outlook | Bullish |
The legs
| Action | Quantity | Option | Model price |
|---|---|---|---|
| Buy | 2 | 97.5 call, 45 days | 5.18 |
| Sell | 1 | 100 call, 45 days | 3.77 |
How it works
Two in-the-money calls against one at the money: the time value nets to about zero, so it behaves like stock. Single options are the building blocks: the right to buy (a call) or to sell (a put) 100 shares at a fixed price, the strike, until expiry. Combined with shares, they add income or protection to a holding.
When it fits
It suits a view that the underlying holds up or rises before expiry.
What can go wrong
The most it can lose at expiry in this example is −$658. Short options can be assigned early, and a sharp fall with implied volatility rising can hurt more than the expiry line suggests, which is what the crash band shows.
Building it in Trident
In the Strategy Lab, choose zebra (zero extrinsic back ratio) and the days to expiry. Trident applies these strike rules to your live chain, prices each leg and draws the trade on the risk graph, where you can drag the days to expiry, change implied volatility or switch on the crash band. When it looks right, send it to order management; nothing reaches your broker until you send it.
Frequently asked questions
What is a zebra (zero extrinsic back ratio)?
Two in-the-money calls against one at the money: the time value nets to about zero, so it behaves like stock.
What is the maximum loss on a zebra (zero extrinsic back ratio)?
In this illustrative example it is −$658 for one lot at expiry.
Where does a zebra (zero extrinsic back ratio) break even?
With the underlying at 100 in this illustrative example, the break-even at expiry is 101.58.
Can I build a zebra (zero extrinsic back ratio) in Trident?
Yes. Pick it in the Strategy Lab and Trident chooses the strikes from your live chain, prices the legs and draws it on the risk graph.
Illustrative example with model prices, not a recommendation. Options carry risk of loss. See the risk disclosure.