DEFINITION of 'Christmas Tree'
An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices. When drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree.
INVESTOPEDIA EXPLAINS 'Christmas Tree'
This strategy is used when an investor believes a stock is going to make a move higher. It is a variation of the ratio spread, so a significant upward move in the stock price will result in a very large loss due to the extra short call. The staggered strike prices for the written calls in the Christmas tree strategy reduce the amount of loss incurred when the share price rises more than expected, unlike the ratio spread, where the call options have the same strike.

Ratio Spread
An options strategy in which an investor simultaneously holds ... 
Option
A financial derivative that represents a contract sold by one ... 
Exercise Price
The price at which the underlying security can be purchased (call ... 
Derivative
A security whose price is dependent upon or derived from one ... 
Call Option
An agreement that gives an investor the right (but not the obligation) ... 
Strike Price
The price at which a specific derivative contract can be exercised. ...

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