Put Ratio Spread
Options strategy · Level 4 · Naked options
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Buy one put and sell two lower-strike puts. The two short puts pay for the long one, so it costs little. You make money from a modest fall to the short strike, and lose a lot if the stock keeps falling.
Where Tradecraft teaches it
Level 4 · Naked options, in the lesson “Ratio spreads: buy one, sell two”: A trade that often costs little to open, with one naked leg hidden inside it.
Related terms
- Call Back SpreadSell one call and buy two higher-strike calls.
- Call Ratio SpreadBuy one call and sell two higher-strike calls.
- Put Back SpreadSell one put and buy two lower-strike puts.
- Ratio spreadA spread that buys one option and sells more than one further out, often two.
- Calendar Spread – CreditBuy the near-term option and sell the longer-term one at the same strike.
- Diagonal Spread – Long leg expires firstBuy a near-term option and sell a longer-term one at a different strike.