Option Strategy- Put Ratio Back Spread

Bull Call Spread

Market View:

Very Bearish and Maket will move either direction

Implementation:

Sell 1 ITM Put option and Buy 2 OTM Put options

  • Sell 1 ITM Put option (Leg 1- HS High premium)
  • Buy 2 OTM Put option (leg 2 - LS Low Premium)

Key trigger points:

  • Spread = Difference between the strikes
  • Net Credit = Premium Received for ITM LS − 2* Premium paid for of OTM HS
  • The payoff when market goes up = Net Credit (at or above HS)
  • Max Loss = Spread − Net Credit (at LS)
  • Lower Breakeven = Lower Strike − Max Loss (Higher Strike - NC)
  • Upper Breakeven = Lower Strike + Max Loss

Calculation for Put Ratio Back Spread

  • Spread =
  • Net Credit =
  • Max Profit(when market is Up) =
  • Max Profit (when market is Down) = Unlimited
  • Max Loss =
  • Lower Breakeven =
  • Upper Breakeven =
  • Upper Profit : Max Loss =
Calculation for lots
  • Sell Lots =
  • Buy Lots =
  • Total Net Credit =
  • Total Profit(When market is Up) =
  • Total Profit (When market is Down) = Unlimited
  • Total Max Loss =