That is a consideration, especially when dealing with an account that is significantly larger than the hypothetical $10,00 account on this journal.
I had had similar experience with them some time ago but the end of the story was quite optimistic, as I started to do the opposite. Try it sometimes and see why backspreads don`t work
as I've been learning the calendar spreads I certainly see the advantage of using ratio spreads on them...
It's not an issue of selling more contracts than are being bought. The opposite is the case. Buying more contracts than you are selling presents a more favorable situation. Much more limited risk with at least a chance for very high profits. Since this is a hot topic (ratioed diagonal calendars) right now on coach's thread, I will make one comment concerning this strategy. It is being touted as a very low risk strategy. That is true under most circumstances. But in order for this strategy to work out well, there must be a Vega increase. If the index you're trading moves well past the short strike and there is no Vega increase, then you're in trouble. Just wanted to throw out a caution flag.
I'm not sure what you mean by Vega increase. I call it "ratio(ed) (diagonal) spread" when you sell more near strike and buy less further strike (opposite to backspread). Hence the "unlimited" (large) risk. This is usually an OTM spread, so its probability of loss is smaller (the further OTM the smaller your risk, and the smaller your reward). This is negatively affected by IV increase, and by the underlying price moving past the short strike, but it benefits from time passing (which is the usual reason to open a ratio spread). Note: I know that optioncoach likes low risk / low reward options strategies like this one and like the deep OTM iron condors.
Sorry, I wasn't thinking when I typed that up really quick. I meant to say IV increase. I'd assumed he was talking about a "ratioed calendar diagonal" in which he was selling a smaller number of front month options at a closer strike, and a larger number of back month options at a more distant strike. This is benefited by an increase in IV and the underlying price moving past the short strike (given that there is a sufficient ratio and a corresponding IV increase).
cnms2, right, like anything in life, always tradeoff, nothing for free etc. I did not say to hold it until expiration. I meant to start whole trading process with it, then watch, adjust etc. Sorry if it sounds sarcastic, it was not my intention.