Put Ratio Vertical Spread

Put Ratio Vertical Spread

Components

Short two OTM put options and long one ITM put option.

Risk / Reward

Maximum Loss: Unlimited on the downside and limited to the net premium paid on the upside.

Maximum Gain: The difference between the two strike prices less the premium paid for the position.

Characteristics

When to use: When you are neutral on market direction and bearish on volatility.

Comments (4)

PeterMarch 26th, 2014 at 3:30am

It will likely be a debit spread - especially if the payoff graph looks like the one on this page. It does depend, however, on the premiums of the option prices when establishing the trade.

GCMarch 22nd, 2014 at 7:16pm

I think a put ratio spread should be a credit spread, isn't that so?

jayMarch 8th, 2014 at 8:58am

i m unable to diffrentiate between the components of PUT RATIO VERTICAL SPREAD AND BACK SPREAD. As the payouts are different, the strategies are diff. Pls elaborate a bit more.
thanx

AUMKARAugust 3rd, 2010 at 1:29pm

This one is the strategy, one can use for the one or two days.

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