When building a Put Ratio Backspread, a trader will sell -1 Put option at a higher strike price, and buy +2 Put Options or more options at a cheaper priced option than the one that was sold. Both strikes should be in the same expiration month.
The strategy has Unlimited Profit potential, limited risk, and is generally used when a trader is aggressively bearish on the underlying chart.
When building a Call Ratio Backspread, a trader will sell -1 Call option at a lower strike price, and buy +2 Call Options or more options at a cheaper priced option than the one that was sold. Both strikes should be in the same expiration month.
The strategy has Unlimited Profit potential, limited risk, and is generally used when a trader is aggressively bullish on the underlying chart.
