Published On: Thu, Apr 4th, 2013

Put Ratio Spread

A put ratio spread is a limited profitability, unlimited risk strategy that is often undertaken when the investor believes that the stock will have low volatility.

A put ratio spread means buying a number of options at one strike price, and then selling a greater number of options at a lower strike price. For instance, a 3:1 put ratio spread would involve buying a number of put options at one price, then selling three times the number of put options at a lower strike price. This strategy has an unlimited potential for risk if the underlying asset price drops below the breakeven point upon expiration of the option.

Share Button

About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.