but suppose in the above case our view is more strong that there maybe some upside but the upside is capped around 6600 for this expiry say
then we could sell 2 calls of 6600
Buy 1 6500 Call @83 and
Sell 2 6600 Call @36
so our intial debit would be 83-36-36 = 11
so we get into the position with only an initial risk of 11
but now we have increased risk on the upside if it goes beyond 6600-11 - 6589 as then from there loss will keep in and loss can be unlimited to the extent of the upmove
This is what is called ratio spread as we have take a buy:sell position in the ratio 1:2
but we are conservative people and not gamblers so we need to buy some insurance to cap the upside
and so we buy 1 6700 Call @12 (max loss will then be 100 + intial debit) or a 6800 call @ 4 rs but then max loss could be 200+ initial debit if mkt closes near 6800
so what insurance we buy can be decided accordingly