Put Ratio Backspread
A put ratio backspread is an options trading strategy that combines short puts and long puts to create a position whose profit and loss potential depends on the ratio of these puts. A put ratio backspread is an options trading strategy that combines short puts and long puts to create a position whose profit and loss potential depends on the ratio of these puts. A put ratio backspread is an options trading strategy that combines short puts and long puts to create a position whose profit and loss potential depends on the ratio of these puts. A put ratio backspread is so called because it seeks to profit from the volatility of the underlying stock, and combines short and long puts in a certain ratio at the discretion of the options investor. A put ratio backspread combines short puts and long puts and seeks to profit from the volatility of the underlying stock.
What Is Put Ratio Backspread?
A put ratio backspread is an options trading strategy that combines short puts and long puts to create a position whose profit and loss potential depends on the ratio of these puts.
Understanding Put Ratio Backspread
A put ratio backspread is so called because it seeks to profit from the volatility of the underlying stock, and combines short and long puts in a certain ratio at the discretion of the options investor. It is constructed to have unlimited potential profit with limited loss, or limited potential profit with the prospect of unlimited loss, depending on how it is structured. The ratio of long to short puts in a put ratio backspread is typically 2:1, 3:2 or 3:1.
Put Ratio Backspread Example
A put ratio backspread combines short puts and long puts and seeks to profit from the volatility of the underlying stock. For example, a stock trading at $29.50 may have one-month puts trading as follows:
Related terms:
Call Ratio Backspread
The call ratio backspread uses long and short call options in various ratios in order to take on a bullish position. read more
Long Put
A long put refers to buying a put option, typically in anticipation of a decline in the underlying asset. read more
Long Straddle
Long straddle is an options strategy consisting of the purchase of both a call and put having the same expiration date and a nearby strike price. read more
Married Put
A married put is an options strategy where an investor, holding a long position in a stock, buys a put on the stock to mimic a call option. read more
Options
Options are financial derivatives that give the buyer the right to buy or sell the underlying asset at a stated price within a specified period. read more
Ratio Call Write
A ratio call write is an options strategy where more call options are written than the amount of underlying shares owned. read more
Ratio Spread
A ratio spread is a neutral options strategy in which an investor simultaneously holds an unequal number of long and short positions in a specific ratio. read more